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Aviation Industry Updates: December 29, 2020

Written by James Onieal | Dec 29, 2020 10:12:06 PM

 

Congress Screws Up Stimulus | Will This Create Rolling Furloughs?

KEY POINTS:

  • The US government is making $15 billion out of the package's $900 billion available to air carriers so they can bring back furloughed workers and restore air service to cities that lost airlines during the pandemic.
  • Airlines accepting the aid will be required to bring back furloughed workers and also agree to similar conditions from the March Coronavirus Aid, Relief, and Economic Security Act regarding executive compensation and national air connectivity levels, among others.
  • Any airline employee furloughed between October 1, 2020, and the time an agreement is reached between the airline and the US government for payroll support will be recalled.
  • If an airline didn't participate in the March stimulus but now wants to apply for funds, they'll have to recall furloughed workers who were stood down from March 27, 2020, onward.
  • Airlines also cannot furlough workers or cut pay and benefits until March 31, 2021, if receiving aid. Recalled workers will be given back pay from December 1, 2020, minus any furlough, severance, or leave pay they might have received.
  • The act also limits stock buybacks with airlines receiving aid prohibited from purchasing securities in their company, parent company, contractors, and the parent companies of contractors until March 31, 2022. Stock dividends and capital distributions will also be prohibited through the same date.
  • American Airlines, Delta Air Lines, and United Airlines welcomed the news and expressed their thanks to the US government for passing the legislation.
  • Executives at United, however, added a stark warning that furloughs will likely continue after March as travel demand isn't expected to pick up by the time the act's provisions expire. "The truth is, we just don't see anything in the data that shows a huge difference in bookings over the next few months," United CEO Scott Kirby and President Brett Hart wrote in a letter to employees. "That is why we expect the recall will be temporary."
  • Southwest Airlines celebrated the news as the aid allows the airline to maintain its 50-year track record of no furloughs or pay cuts for another year.

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