The financial help available to airlines under the Coronavirus Aid, Relief, and Economic Security Act (CARES) come with restrictions and conditions that may keep eligible airlines from going after at least some of it.
Grants must be used to meet payrolls, and involuntary layoffs are not allowed through September. Loans come with a requirement to maintain staffing levels as much as possible, with a maximum reduction of 10% until the fourth quarter. Airlines taking loans also would be required to maintain at least some service in markets they served as of March 1; the grant provisions say airlines “may” be required to keep flights.
"U.S. airlines were among the first industries to feel the economic impacts of the pandemic and will be key to our country’s recovery,” said Airlines For America President Nick Calio. "The [payroll assistance] provisions in the CARES Act are designed to provide immediate financial relief that is necessary to continue funding the payrolls of U.S. airlines. We remain hopeful that the federal government will expeditiously release these funds with as few restrictions as possible to ensure airlines are able to utilize these provisions and meet our payroll."
The aid package, while lauded by A4A and others, could have different effects on mechanics at different airlines.
For example, with a new contract signed and government aid under CARES, the Transport Workers Union Of America is confident there will be no involuntary layoffs, at least until September, of mechanics at American Airlines and its subsidiary Envoy Airlines, according to TWU International Vice President Gary Peterson.
The new TWU-American contract, signed just as CARES was clearing its final congressional hurdles, has a no-reduction clause. The airline may propose other ways for unneeded mechanics to leave, offering retirement packages, furloughs or leaves of absence with small compensation and benefits. These alternatives will likely attract some workers, Peterson says.
Peterson emphasizes there is still maintenance that must be performed, even on idled aircraft. “It’s not like parking a car.”
The TWU exec is satisfied that the major carrier is doing all it should to guard workers from the coronavirus with masks, gloves and other personal protective equipment (PPE). Union safety committees work with management on PPE policy.
And the TWU and International Association of Machinist are very happy with their new contract, which gives both former American and former US Airways mechanics the same job protection and wages, which Peterson says are the best in the industry.
TWU and IAM overwhelmingly ratified the new contracts covering more than 30,000 mechanics, maintenance control technicians, maintenance trainers, fleet servicers, logistics and stores workers, with more than 90% of mechanics approving on March 26.
Vinny Graziano, national coordinator mechanics at the International Brotherhood of Teamsters, argues the most important decisions airlines will make is about accepting the stimulus and the federal grants. Graziano understands the pressure on carriers to reduce capacity. “The federal grants provide a safety net to support jobs by ensuring employee pay and benefits . . .for six months.”
He argues that any loss of mechanics, even via voluntary leave, early outs or furloughs, will reduce the availability of mechanics after the crisis and could depress the attractiveness of a career in aviation over the longer term. The Teamsters represent mechanics at United Airlines, Allegiant, UPS Air Cargo, ExpressJet, Frontier Airlines and Piedmont Airlines.
American Airlines declined to comment on employment prospects, but the airline plans to apply for CARES loans and grants.
“These funds are being distributed to ensure continuation of essential airline service and project jobs,” American CEO Doug Parker and president Robert Isom wrote in a Mar. 30 employee memo. “We intend to apply for these funds and are confident that, along with our relatively high available cash position, they will allow us to fly through even the worst of potential future scenarios.”
Aircraft Mechanics Fraternal Association National Director Bret Oestreich is less comfortable with his members’ position at Southwest Airlines and Alaska Airlines. As of March 31, neither Southwest nor Alaska had indicated it will accept assistance.
“A significant portion of the package is financial assistance grants, not loans,” Oestreich stressed. “The grants are specifically designed to fully cover the financial costs of airline employee pay and benefits, and to ensure no employee faces involuntary furlough or concessions over the next six months. These federal grants...do not have to be repaid by law. They are in addition to billions in loans available to assist airlines in covering other financial impacts of the pandemic.”
The AMFA director says that if Southwest and Alaska do not accept federal grant money, all stakeholders will be in a far worse financial position. “It is clear that partial paid leaves or concessions, which CEOs, including Gary Kelly, have touted, would cut many employee’s pay, but will not save the companies as much as accepting the grant money would.”
A Southwest spokesperson said the airline is reviewing CARES grants and loans procedures to fully understand requirements. “Until we’ve had more time to review and study the procedures, it’s premature to say how we will proceed . . . Southwest has never furloughed in our history, and it is our goal to maintain that precedent.”