Businessman Kevin O’Leary told CNBC on Thursday that the U.S. government should not provide another round of financial aid to airlines during the coronavirus pandemic.
“No more money for airlines. We don’t need it anymore. The fact is, you have to let some of them go bankrupt,” the “Shark Tank” investor said on “Squawk Box.”
O’Leary’s comments came ahead of a meeting Thursday between U.S. airline executives and White House chief of staff Mark Meadows regarding further aid for the industry. The CEOs are advocating for another $25 billion in support on top of the assistance that was granted as part of the $2.2 trillion CARES Act in March.
As part of that initial $25 billion, the carriers were prohibited from cutting jobs through Sept. 30. But with air travel still suppressed due to Covid-19, albeit better than its April nadir, some major U.S. airlines have said they may furlough or lay off thousands of employees perhaps as soon as next month.
There is some support in Congress for additional airline relief, which would protect jobs through March. However, negotiations on a broader coronavirus aid package have been stalled for weeks as Democrats and Trump administration leaders struggled to agree on the scale and scope of possible legislation.
O’Leary, who has previously opposed additional aid to businesses, said he believes the U.S economy will be substantially altered as a result of the pandemic, with consumers adopting new behaviors. For example, O’Leary said, “I am convinced business travel will drop 15% to 20% even after the vaccine hits.”
“We don’t need all those airlines. Let them go bankrupt and go through the asset transfer to the better managers,” he added.
However, O’Leary, who has numerous business investments through “Shark Tank,” said there is a role for the government to play in providing assistance to workers during the upheaval. “I don’t mind giving employees some support during this transition, this digital pivot that’s occurring in the economy.” He also runs an exchange-traded fund company, O’Shares ETFs.
But, he added, “I’ve now come to the conclusion, crystal clear, that 25% of my companies are going to fail. There is nothing I can do about it, and nothing the government can. I’m sorry, the world has changed.”
Entrepreneur John Hope Bryant, who is founder and CEO of the financial literacy organization Operation Hope, said he believes in O’Leary’s premise that a free market should decide the winners and losers. However, he stressed the public-health crisis is a difficult operating environment for business, especially airlines. He said there would be benefits in providing aid that allows the carriers to retain workers.
“In 2020, early 2021, yes, give them support,” he said on “Squawk Box,” appearing with O’Leary. “Let them fail in a market economy. This is a pandemic.”
Bryant said it is important for the government to boost industries in the private sector during a challenging economic landscape because those businesses, in turn, “boost the GDP.” He added, “You don’t want consumers not to be able to consumer because you go broke.”
Disclosure: CNBC owns the exclusive off-network cable rights to ″Shark Tank,” on which Kevin O’Leary is a co-host.
