$1.9T American Rescue Plan Staunches Airline Worker Layoffs
President Joe Biden on Thursday signed the $1.9 trillion American Rescue Plan, which includes among other transportation industry funding $14 billion in direct aid to airlines for payroll support programs. Like previous emergency funding packages disbursed to the hard-hit travel category, including those provided in the $2.2 trillion CARES Act last March and the $900 billion coronavirus relief bill passed in December, the aid comes with requirements. The new payroll extension must be used to maintain current employee rosters through Sept. 30, 2021, and recipient carriers must refrain from buying back stock, issuing dividends or increasing executive compensation through Sept. 30, 2022.
The Rescue Plan comes through just as layoff limitations stipulated in the previous round of aid approved in December were slated to end on March 31. Both United Airlines and American Airlines were poised to release workers after that date. Both now have pulled back from those intentions.
A Wednesday memo to employees, signed by American Airlines CEO Doug Parker and president Robert Isom, noted that 13,000 team members had received warnings last month about upcoming layoffs. Those warnings, the executives wrote, were “happily cancelled—you can tear them up!”
In the meantime, United Airlines, which had warned in January of layoffs for 14,000 workers starting April 1, also issued a 180-degree pivot on the issue. CEO Scott Kirby posted on LinkedIn that the airline is working to emerge from the downturn with new innovations and a reputation for doing the right thing. “By extending [the payroll support program], our teams will be able to remain current in their training and ready to match expected future demand.”
Principal at International Aviation Law Kenneth Quinn lauded the aid package and pointed out other governments had failed to take robust action to support a critical industry. “It is a remarkable show of support for the US airline industry, and its importance to global travel and tourism—over 5% GDP,” he wrote on LinkedIn in response to Kirby’s post. “Other governments, particularly in the EU and Latin America, would be wise to follow suit.”
Job Security Whiplash
While the U.S. government clearly has been supportive, airline workers have been caught in the crosshairs of legislative negotiations and airline survival strategies since last March. Layoff stipulations in the CARES Act payroll support program ended on Sept. 30, 2020. After that date, American Airlines issued notices to 19,000 employees, according to a company memo signed by Parker. United Airlines laid off 13,000 at that time. Both companies pointed to a gridlocked Congress that failed to pass additional aid for the industry, and both companies vowed they would not stop fighting for more.
Throughout 2020 and 2021, airlines signaled their respective crises to legislators by issuing warnings about upcoming layoffs, ostensibly daring legislators not to pass additional aid packages. Congress took the dare. Airlines spent the fourth quarter with no additional funds. Even Southwest Airlines, which had never implemented broad-based companywide layoffs in its 50-year history, began to issue warnings of laying off 7,500 workers by spring. Delta Air Lines implemented a voluntary layoff and early retirement offer, which sliced 32 percent of its payroll by October, according to a report from Yahoo Finance.
After an eleventh-hour $900 billion coronavirus relief bill passed in December, with $15 billion marked for airlines, carriers turned an about-face. American and United immediately began the process of recalling thousands of workers, while Southwest canceled its reduction plans. Yet, both American and United issues layoff warnings again in February and January, respectively.
Will this latest round of snapping workers back from the cliff of unemployment somehow be different?
As with the first round of aid, the six-month term gives workers more breathing room before the threat of layoffs begins again in earnest. This time, however, the U.S. and the world are at a critical juncture in the pandemic recovery, with vaccination efforts out in force.
The Narrow Path
Speaking from the White House Thursday night after signing the American Rescue Plan, Biden urged all eligible adults to be vaccinated, but also warned that lifting social-distancing restrictions too soon would undermine efforts to lower transmission rates. He projected July 4 as a date when ‘small groups’ might gather safely and unencumbered. He specifically called out travel as an activity that will get revised guidance. “As more people are vaccinated, the [Centers for Disease Control and Protection] will continue to provide additional guidance on what you can do in the workplace, places of worship, with your friends as well as travel.”
In the meantime, robust Covid-19 testing requirements prior to flying have tightened up the airline passenger risk scenario, which several studies have suggested already was at a minimal level. These protocols, combined with higher vaccination rates and the potential adoption of ‘health passports,’ are the tools the industry will use to build customer confidence that will translate into demand.
Kirby, for one, is confident that demand is on its way, including business travel demand, which he told CAPA Live attendees this week “was about relationships” that couldn’t be reduced to technology-mediated meetings.
According to a February Global Business Travel Association poll, 55 percent of travel managers said their organizations’ business travelers are at least somewhat willing to travel now. Airlines Reporting Corp., which tracks travel agency sales, has shown some progress as well. Overall air ticket sales (not limited to corporate-focused agencies) have increased for the past seven weeks consecutively in comparisons to 2019. The week ending March 7 saw ticket sales down 56 percent compared to 2019. That compares to the week ending Jan. 3, when ticket sales were down 72 percent. That’s a 16 percentage-point jump in the comparisons.
A report by Fintech Zoom, citing Bank of America tracking of airlines’ ticket spend, attributed the jump to vaccinated seniors who are ready to get back to the travel and human connections that makes them happy. As confidence in immunity grows, airline employees may be first in line for some happiness—the kind that comes with job security that isn’t reliant on constant lobbying, legislative negotiations and warnings that every two months they may lose what they’ve worked so hard to maintain.
Airlines for America president Nicholas Calio acknowledged this dedication in a press statement on Wednesday that thanked the U.S. Congress for passing the measure.
“U.S. airline employees have worked tirelessly to provide essential services throughout the Covid-19 crisis, including transporting vaccines, medical equipment, personnel and supplies. These men and women are the backbone of our industry, and they are an integral part of our nation’s infrastructure,” he said. “It is vital to have our employees on the job and ready to assist as our nation prepares to move forward from this crisis and resume connecting communities, families and businesses across the country and around the world.”
All eyes in the airline industry are now on Sept. 30 to push all these efforts toward sustainable recovery.