Airlines profits have been bolstered by billions in government subsidies. Meanwhile, wages for airlines’ contract service workers have dropped up to 45 percent since 2002.
Some subsidies are visible, according to a March 8, 2013, Boston Globe article: The federal government provides 30 percent of the budget of $7.6 billion to the Transportation Security Administration, which inspects passengers before they board, and 30 percent of the budget of the Federal Aviation Administration, which supplies air traffic control.
This amounts to about $3 billion in direct subsidies.
Most airports in the United States are owned by a public entity — a city, county or state or a public entity like the Port Authority of New York & New Jersey. Not making the airlines inspect passengers and providing services so planes can take off and land amount to other subsidies — which are hard to quantify.
Under the federal tax code of 1986, local and state governments are allowed to issue tax-exempt bonds to finance the expansion of businesses, with the pretext that this creates jobs. The March 4, 2013, New York Times estimated that “more than $65 billion of these bonds have been issued” since 2003. Businesses save a lot of money using these bonds because they can borrow at a much lower rate.
Politically, since this is a tax-avoidance scheme, there is no dollar amount for critics to point to that goes into the pockets of the super rich .01%.
According to a New York Daily News article of Jan. 21, American Airlines got $1.3 billion of these bonds to finance its new terminal at Kennedy International. Jet Blue got $300 million, and a group of international airlines got $417 million. Delta got $800 million in 2010, with an additional $175 million.
Adding up the subsidies shows that the airlines got nearly $3 billion in government-subsidized loans on the promise to create more jobs. The airlines then outsourced the work to avoid paying union wages to direct hires.
An airline industry spokesperson made this maneuver clear by pointing out to the Daily News, “Wages and benefits paid by the contractors … are solely established by the contractors.” In other words, don’t blame the airlines.
Airlines use lowest-paying contractor
But the airlines decide who gets the contracts based on price, which is based on wages paid. That means airlines sign with contractors that pay less. Local 32BJ of the Service Employee union, which is trying to organize the contracted service workers at all three New York City airports, calls this a “race to the bottom.”
Actually, it turns out this is a race to below the bottom.
Workers who may get tips — skycaps who move luggage and workers who push wheelchairs for disabled people — are paid only $4.40 an hour, which is below the state-imposed $5.50 an hour for tipped workers. But, according to the Daily News, they can’t collect the legally mandated wage until New York state finishes an investigation.
Companies can borrow billions with far less trouble than workers can get the mandated minimum wage. The Port Authority, which owns the airports, could impose a $15-an-hour minimum as a requirement for doing business on its property, but the PA obviously doesn’t want to do anything that hurts the airlines’ bottom line.