The CARES Act Update
By ALPA Staff
On March 27, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law offering a much-beleaguered U.S. aviation industry a $61 billion economic stimulus package. Unlike financial assistance authorized to address previous air transportation crises, the CARES Act took federal aid in a whole new direction, requiring participating airlines that tap into grant money—available through a payroll support program—to use it strictly for employee compensation.
An ALPA statement about this landmark legislation noted, “By helping to stabilize the airline industry while protecting frontline aviation workers, we’ll ensure that, when the time comes, the return to normal operations will be done safely and swiftly.” The law provides additional worker protections for airlines that participate, including a ban on laying off employees or reducing their pay rates and benefits through September 30, and most U.S. passenger carriers with ALPA members are benefitting from grants and/or loans made available by this law. Carriers are also required to maintain certain service levels.
Some airlines have cut employee schedules to help limit costs while others have announced comprehensive pilot displacements that don’t include pay protections for downgrades in equipment or status. These actions have prompted questions about whether airlines that make these decisions are complying with the intent of the CARES Act. However, enforcement of the labor protections afforded by the legislation is within the exclusive authority of the Department of the Treasury, and it has neither raised concerns about these actions nor concluded that the carriers aren’t complying with the law.
More recently, airlines have asked for exemptions from serving smaller airports that have nominal demand or special allowance for consolidating flights into markets that have multiple airports, and the Department of Transportation has agreed, outlining certain stipulations.
CARES Act financial aid has provided a lifeline to the U.S. airline industry at a time when the demand for air travel had all but evaporated. While some stakeholders have called into question the way the law has been interpreted, this federal relief has been a blessing for airlines confronting a desperate cashflow and liquidity crisis. In addition, the September 30 time limit has given airlines and airline workers some much-needed breathing space to prepare for the industry adjustments that will likely come next.
CARES Act: Unprecedented Labor Provisions
The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides $61 billion in direct grants and loans to the aviation industry. Layered between the grants and loans are labor protections that were agreed upon after long hours of negotiations and ALPA engagement with key Members of Congress as they debated through the month of March.
Several of the worker protections included in the legislation are unprecedented in government relief legislation and highlight a major contrast to the situation following 9/11. Not only are these labor provisions a win for ALPA, but they set precedent for future relief legislation. Strong labor requirements preserve aviation jobs and ensure a level of stability during this uncertain time.
Because of the CARES Act:
- Collective bargaining agreements will be maintained with respect to direct relief to airlines through the payroll support program (PSP). The government via the Treasury Department can’t require worker concessions or changes to bargaining agreements as a condition of PSP grants. This is a significant departure from past practice, including the post-9/11 airline industry bailout when reductions in labor costs were a prerequisite for government funds.
- Grant funding will go exclusively toward worker payroll and benefits.
- Limits have been placed on executive compensation.
- Airlines can’t use federal relief funds on stock buybacks or shareholder dividends.
- Furloughs are prohibited through September 30.