U.S. markets open in 1 hour 26 minutes
  • S&P Futures

    +1.50 (+0.04%)
  • Dow Futures

    +64.00 (+0.21%)
  • Nasdaq Futures

    -31.75 (-0.28%)
  • Russell 2000 Futures

    +5.00 (+0.28%)
  • Crude Oil

    +1.19 (+1.35%)
  • Gold

    -3.80 (-0.22%)
  • Silver

    +0.02 (+0.12%)

    +0.0001 (+0.01%)
  • 10-Yr Bond

    0.0000 (0.00%)
  • Vix

    +1.80 (+6.30%)

    +0.0035 (+0.31%)

    -0.1730 (-0.12%)

    -257.35 (-1.27%)
  • CMC Crypto 200

    -8.34 (-1.80%)
  • FTSE 100

    +9.81 (+0.14%)
  • Nikkei 225

    -195.19 (-0.71%)

Sen. Bernie Sanders calls for airlines to pay customers for cancelled flights

Sen. Bernie Sanders (I-VT) bashed airlines for recent travel disruptions, and called on them to start reimbursing their customers for cancellations.

Video Transcript

SEANA SMITH: Senator Bernie Sanders going after airlines. He wants the industry to be fined for canceled flights. He also wants them to be penalized for delayed flights, calling for, quote, "immediate action" in a letter to Transportation Secretary Pete Buttigieg earlier today. We want to bring in Rick Newman for more on this.

And Rick, just to read a part of this letter from Sanders to Buttigieg, he said that, quote, "During the pandemic when air travel came to a near halt, US taxpayers came to the rescue and gave $54 billion to the airline industry. Given all the generous taxpayer support that has been provided to the airline industry, all of us have a responsibility to make sure that passengers and crew members are treated with respect, not contempt." The argument makes sense, but he's calling for some pretty hefty fines on the airline industry.

RICK NEWMAN: And I think you could call what his proposals are counterproductive. So Sanders wants to fine the airlines a large amount per passenger for every flight they cancel. Other things like if you're delayed for more than an hour, the airline gets fined. And let's just step back and think about what's going on here. So anybody who has flown lately-- that includes me-- knows that it has become a very taxing experience.

There are not enough employees at the airlines. COVID is still a problem. So they're having a hard time hiring workers, just like everybody else. And they have people calling in sick with COVID. So they are having to cancel flights, and they're trying to do the triage they normally do with canceled flights. And it's a real pain.

But at the same time, what's happening here in the overall economy is exactly what we want to be happening, which is people want to go back and spend money on services again. Travel is a service. And as we come out of the whole COVID downturn, people are spending less on goods and more on services. So what is happening along with that is the supply chain kinks that we saw a year ago, let's say, in the availability of many goods, which contribute to inflation there, now migrating over to services.

So we have increasing demand for services, including air travel, at a time when the supply is not quite there. So we're having the same sorts of problems in the service part of the economy now that we had in the goods part of the economy a year, 18 months ago. That is actually a sign of progress. Nobody likes it.

And if you start to penalize or punish the airlines for these problems, instead of giving them some room to work it out, what are they going to do? They're going to pass the cost along to consumers. And they're going to take other steps that might mean they'll rail in capacity even less, which could push prices up even more. So Bernie Sanders, as he often does, he's voicing many people's frustrations, but his solutions are bad ones.

DAVE BRIGGS: Yeah, he is overshooting the runway here by about 100 miles. To be clear, he's calling for $55,000 fines per passenger per flight that an airline cannot actually staff. That would put the airlines out of business in about a week. We all sympathize with the frustrations that passengers are going through. But as for that $54 billion, what did the airlines do with that money, Rick?

RICK NEWMAN: That was along with the Paycheck Protection Program. So they used that to keep people on staff. I mean, so let's just go back to where we were two years ago. The airline industry got crushed about as badly as any industry possibly could because that was the last thing anybody wanted to do during COVID, was get on an airplane. Remember, that was before vaccines, before we even knew what this virus was. And this industry practically cratered.

And we probably would have seen-- without any aid, we probably would have seen some of the US airlines go bankrupt. I mean, it was that degree of a shock. And they lost billions. And they still have not really recovered from that. So that money kept the airline industry afloat so that we would have an industry when we came back from COVID, and it also kept a lot of those employees on the payrolls.

Now, there were some voluntary furloughs. They paid people to retire. And that reduced staffing at the airlines. And that's a problem now. So this is where Bernie-- this is what is now causing the problems. But so I think what's going to happen here, Brad, is the airlines recognize that getting a black eye right now-- we saw Delta recently come out and say, look, ahead of the 4th of July travel weekend, we're going to waive cancelation fees for people, so they can make reasonable changes to their itineraries.

That is a smart move. And as they start to get hammered by Bernie and by others, who are criticizing all these problems, we probably will see the airlines voluntarily coming up with some piecemeal solutions like that, which, actually, might be a good way to get-- to sort of address these problems until we get to a more smoothly functioning industry.

RACHELLE AKUFFO: It doesn't help that we're still in that phase of very pent-up demand from COVID still working its way through the system. Are you expecting these bottlenecks, some of this pressure to ease on airlines perhaps after this summer phase has passed?

RICK NEWMAN: One would think. I mean, we actually are getting back to more normal economic patterns. We're just not there yet. So think about what's happened to the retailers, Target and Walmart. They ordered too much inventory, and look what happened. They had a bunch of stuff on their shelves that consumers did want a year ago. But this year, they don't want it. They want to spend their money on something new.

And the reason that airfares are high is that despite all these hassles, people want to travel anyway. I mean, there are people who have not taken a vacation in two or 2 and 1/2 or three years, and they're willing to deal with the hassles to get on a plane. So as this all-- as we go through the process, the airlines will hire a bit more. They will add a bit of capacity. They're going to do it carefully, but we will eventually get to a better place. It's just not going to happen overnight.

DAVE BRIGGS: Senior columnist Rick Newman, we appreciate it, sir. Thank you.