- The new COVID-19 stimulus package signed by President Donald Trump includes $ 15 billion for airlines.
- Workers dismissed from October 1, 2020 will be recalled and returned from December 1, 2020.
- Executive compensation and share buyback are also limited and air connectivity will be restored in cities that have lost their airlines.
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President Donald Trump signed a long-awaited COVID-19 stimulus package on Sunday and airlines are among the biggest winners. The U.S. government is making $ 15 billion of the $ 900 billion package available to air carriers so they can bring licensed workers back and restore air service to cities that lost airlines during the pandemic.
Airline workers were referred to directly by the president in his statement announcing that the bill would be signed after initially asking Congress to review its allocations, specifically to increase direct payments to Americans and reduce foreign aid.
More than 32,000 airline workers have been licensed since March, with airlines being overstaffed, as less than a million daily passengers flew to the skies during most of the pandemic, with the exception of holidays.
Read More: Airline CEOs say that no matter how well they protect COVID-19 passengers – travel demand will not recover until the pandemic is over
Airlines accepting the aid will be required to bring the redundant workers back and also agree to similar conditions under the March Aid, Aid and Economic Security Law for the Coronavirus of March regarding executive compensation and national air connectivity levels, among others.
Here’s what airlines can expect from the new stimulus package.
Terms and Conditions
Any airline employee licensed between October 1, 2020 and the time an agreement is reached between the airline and the US government for payroll support will be canceled. The 1st of October saw the expiration of the employment clauses of the CARES Law and resulted in large-scale licenses and reductions in air routes.
If an airline did not participate in the March stimulus, but now wants to apply for funds, it will have to summon the redundant workers who were laid off from March 27, 2020 onwards.
Airlines also cannot lay off workers or cut wages and benefits until March 31, 2021, if they receive assistance. Recalled workers will receive retroactive payment from December 1, 2020, less any time off, indemnity or leave they may have received.
National air connectivity will also be partially restored, as aided airlines will be required to maintain service in all cities they served before March 1, 2020. The law only specifies cities, however, and not routes, for that an airline can operate as little as a weekly flight to a city and be within the law.
The law also limits the repurchase of shares with airlines that are prohibited from buying securities of their company, parent company, contractors and parent companies from contractors until March 31, 2022. Dividends on shares and capital distributions will also be prohibited until the same date.
Executive compensation is also limited by another remnant of the CARES Act of March. Employees who earned more than $ 425,000 in total compensation not determined by a collective bargaining agreement in 2019 will receive no more than their total compensation in 2019 for a period of two years. If they leave the airline, the termination cannot exceed twice the full 2019 compensation.
Those earning more than $ 3 million will have their total compensation limited to $ 3 million, plus 50% of the excess total compensation received over $ 3 million.
Hired airlines, including catering employees and hired airport employees not directly employed by an airline, are also included in the package, receiving $ 1 billion in aid.
How airlines responded
American Airlines, Delta Air Lines and United Airlines welcomed the news and expressed their thanks to the United States government for passing the legislation. United executives, however, added a stern warning that licenses are likely to continue after March, as travel demand is unlikely to increase when the law’s provisions expire.
“The truth is that we just don’t see anything in the data that shows a huge difference in reserves in the coming months,” wrote United CEO Scott Kirby and President Brett Hart in a letter to employees. “That’s why we expect the recall to be temporary.”
Southwest Airlines welcomed the news, as the aid allows the airline to maintain its 50-year track record without time off or pay cuts for another year. Furlough notices were sent in December to nearly 7,000 workgroup employees across the airline, with salary cuts being the only proposed alternative.
The airlines will now begin to apply for assistance and begin the recall process for their licensed workers. Treasury payments to airlines requesting assistance will begin no later than 10 days after Sunday, the law says.
As Kirby and Hart clearly told employees, this cycle could start again in April if additional aid is not guaranteed. And the government’s track record in approving additional aid and stimulus packages was not stellar, even in the face of thousands of licenses in October.
The new stimulus, however, comes just weeks after the first COVID-19 vaccine received an emergency authorization from the Food and Drug Administration, a critical step in the recovery of the civil aviation sector. If more people return to the skies by 2021, additional relief for airlines may not be necessary.