The new COVID-19 stimulus package signed by President Donald Trump includes $15 billion for airlines.
Workers furloughed from October 1, 2020, will be recalled and given back pay from December 1, 2020.
Executive compensation and stock buybacks are also limited and air connectivity will be restored to cities that lost their airlines.
President Donald Trump signed a long-awaited COVID-19 stimulus package on Sunday and airlines are among the biggest winners. 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.
Airline workers were directly referenced by the president in his statement announcing that the bill would be signed after initially calling for Congress to revise its allocations, specifically to increase direct payments to Americans and reduce foreign aid.
Over 32,000 airline workers have been furloughed since March with airlines finding themselves overstaffed as less than one million daily passengers have taken to the skies for most of the pandemic, with the exception of the holidays.
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.
Here's what airlines can expect in the new stimulus package.
The terms and conditions
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. October 1 saw the expiration of the employment clauses of the CARES Act and triggered large-scale furloughs and air route reductions.
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.
National air connectivity will also be partially restored as airlines receiving aid will be required to maintain service to all of the cities they served before March 1, 2020. The act only specifies cities, however, and not routes so an airline can operate as little as one weekly flight to a city and be within the law.
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.
Executive compensation is also limited in another holdover from the March CARES Act. Employees who made over $425,000 in total compensation not determined by a collective bargaining agreement in 2019 will not receive more than their 2019 total compensation for a two-year period. If they leave the airline, their severance cannot exceed more than twice their 2019 total compensation.
Those making over $3 million will have their total compensation capped at $3 million, plus 50% of the excess of total compensation received over $3 million.
Airline contractors including catering workers and contracted airport staff not directly employed by an airline are also included in the package, receiving $1 billion in aid.
How airlines have responded
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. Furlough notices were sent in December to nearly 7,000 employees from workgroups across the airline with pay cuts the only proposed alternative.
Airlines will now begin applying for the aid and beginning the process of recalling their furloughed workers. Payments from the Treasury to airlines requesting assistance will begin no later than 10 days from Sunday, the law states.
As Kirby and Hart plainly told employees, this cycle may begin again in April if additional aid isn't secured. And the government's track record on passing additional aid and stimulus packages hasn't been stellar, even in the face of thousands of furloughs 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 for the airline industry's recovery. If more people return to the skies in 2021, additional relief for the airlines may not be required.
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