While there has been considerable coverage of the existing airlines moving to add flights in markets announced by start-up carriers Avelo and Breeze, presumably with the hope to drive them out of business, little has been said about how tax dollars are subsidizing that effort.
Tax Dollars Are Helping Existing Carriers Suffocate Avelo/Breeze
Thanks to the American Rescue Plan (SEC.7301 a4A) passed by Congress, only carriers that provided air transportation as of March 31, 2021 are eligible for payroll subsidies for the period from April to September, and they total $15,000,000,000 (15 billion dollars). Due to this apparent oversight, Breeze and Avelo are frozen out and must compete against tax payer subsidized competition by the same airlines that were complaining about unfair government airline subsidies just a few years ago. How much money is this? The subsidy equals about 0.66 cents per seat per mile flown during the covered period.
Avelo recently offered a fare of $19 from its Burbank base to Ogden, Utah, an alternate airport for Salt Lake City. For an airline competing with them, the subsidy gives them about 25% more revenue per passenger than Avelo, or an extra $4.79 if you assume 75% of seats will be full. That may not seem like much, but in Avelo’s Burbank routes to Phoenix, Salt Lake City, and Sonoma it amounts to almost $1.5 million in tax payer subsidies for their competitors during the period from when Avelo began flying until the program is slated to end October 1st.
Burbank to Sonoma County, California was not even served until announced by Avelo, but Alaska Airlines announced the route as well shortly afterward. Alaska will get a taxpayer subsidy of nearly $50,000 for their trouble through October 1st. In fact, service in the Phoenix, Salt Lake City, and Sonoma markets has more than doubled since Avelo announced service, not even including Avelo’s flights. Of the $1,466,426 taxpayer subsidy, over $655,000 of it is just to subsidize flights added since Avelo came into town.
Why didn’t they start earlier and qualify for the same subsidies?
You might say it’s their own fault, they should have started flying earlier, but they weren’t allowed to. In both cases federal government regulatory approval delayed start dates, and were pushed deeper into 2021 as a result of delays in the regulatory review caused by COVID-19, the very same pandemic that spawned the American Rescue Plan subsidies for the other airlines. In the case of Breeze, even recent plans were delayed by several months. Certainly it would have made more sense for eligibility to be granted to any airline that operated during the covered period, rather than a date set just before either Avelo or Breeze could start, but one can only speculate how that date (which only applied to airlines) was determined.
What about Breeze?
We haven’t fully seen what Breeze will face in terms of competitive reactions, but just this week Spirit announced it would begin Louisville – Tampa service, shortly after it was announced by Breeze. Southwest which already flew the route already will get $223,000 in taxpayer subsidies while it competes with Breeze. In fact, just existing service in markets announced by Breeze will garner $699,000 in federal subsidies. So far, that’s $2.2 million in federal subsidies to help airlines compete with Avelo and Breeze, but the number will continue to rise as airlines pile on more flights to teach them a lesson…stay out of our markets, a lesson funded by your tax dollars.
American Rescue Plan SEC.7301 b1A/B
“IN GENERAL.—The Secretary shall make available to eligible air carriers and eligible contractors, financial assistance exclusively for the continuation of payment of employee wages, salaries, and benefits to eligible air carriers, in an aggregate amount of $14,000,000,000 and (B) eligible contractors, in an aggregate amount of $1,000,000,000.
American Rescue Plan SEC.7301 b4B
"the term “eligible air carrier” means an air carrier that…provides air transportation as of March 31, 2021"
Avelo’s first flight took off April 28, 2021
Breeze’s first flight took off May 27th, 2021
