Airlines get what they wanted in Senate stimulus negotiations

The latest bill also includes the $10 billion requested by U.S. airports

People wearing masks watch airplanes at Gravelly Point Park as they fly into Ronald Reagan Washington National Airport on March 17, 2020. (Caroline Brehman/CQ Roll Call)
People wearing masks watch airplanes at Gravelly Point Park as they fly into Ronald Reagan Washington National Airport on March 17, 2020. (Caroline Brehman/CQ Roll Call)
Posted March 25, 2020 at 3:14pm, Updated at 5:08pm

The transportation sector would receive more than $114 billion in the newest Senate bill aimed at blunting the impact of the coronavirus pandemic, including $46 billion in loans and $68 billions in grants and other appropriations.

The bill is most generous to the aviation sector, providing $25 billion in grants to passenger airlines, $25 billion in loans to passenger airlines, $4 billion in grants to cargo airlines and $4 billion in loans to cargo airlines. It also provides $3 billion to contractors in the aviation sector, such as catering, ground crew, ticketing and check-in employees.

But for the $3 billion for contractors, the bill matches what Airlines for America, an industry group, had called for.

In addition, the bill includes $17 billion in loans for businesses deemed critical to national security. The provision is widely believed to have been written to benefit Boeing, the defense contractor and aircraft manufacturer, which asked for $60 billion in increased liquidity during the crisis.

The aircraft manufacturer’s troubles predate the coronavirus, with its Boeing 737 Max grounded since last March, after two crashes that killed 346 people.

The dollars would come with strings attached: loans are limited to five years and the federal government receives equity in publicly-traded recipients, said Jeff Davis of the Eno Center for Transportation, who added up the total in the bill.

Loan recipients must also maintain employment levels “to the extent practicable” and are barred from cutting more than 10 percent from their base unemployment. And loans will only be available to those to which regular credit is not available as a result of the pandemic, and to those who have incurred or are expected to incur loss because of the coronavirus.

“In other words, (Treasury Secretary Steven) Mnuchin has to agree you’ll go out of business if you don’t get this loan,” Davis said.

Grants, he said, would be allocated in proportion to the salaries and benefits airlines paid between April 1 and Sept. 30, 2019. Companies that accept grants would be barred from cutting pay or benefits or enacting involuntary furloughs until Oct. 1. 

Both loans and grants also would come with restrictions aimed at barring the money from being used for stock buybacks or increasing executive compensation.

The bill also includes tax relief, by suspending the collection of both the Airport and Airway Trust Fund Excise taxes through Jan. 1, 2021.

Earlier versions of the Senate bill had included only loans, but the airline industry, unions and Democrats protested, saying the industry needed an immediate infusion of cash to preserve jobs. 

Airport aid

The latest bill also includes the $10 billion requested by U.S. airports, which estimate that they will lose at least $14 billion as a result of the coronavirus pandemic. 

“The entire airport industry is extremely grateful Congress and the Trump administration have stepped up to help offset a portion of the $14 billion and counting that airports will lose this year as a result of the steep, unexpected drop in travel brought about by the coronavirus health pandemic,” said Kevin M. Burke, Airports Council International-North America president and CEO.

Airports have struggled with a debt burden of some $100 billion, accumulated over the course of two decades. Airports owe some $7.4 billion at the end of the calendar year, according to ACI-NA.

If the $10 billion is included in that final bill, much could help with debt servicing. The money is split between the federal Airport Improvement Program, which received $500 million, $7.4 billion that can be used “for any purposes,” and $2 billion for grants. The one restriction, Davis said, was that airports must maintain at least 90 percent of their employees from the date of enactment of the elaw through Dec. 21.

The bill also includes just over $1 billion for Amtrak, split between the railway’s national network and its northeast corridor. 

It would also provide $25 billion for transit systems, which have seen ridership plummet, as well as $56 million to subsidize essential air service and $25 million for FAA emergency appropriations.

It also includes language to extend the deadline for the REAL ID, an enhanced form of identification that will be required to board airplane, to Sept. 30, 2021. The current deadline is Oct. 1 of this year. President Donald Trump said he planned to delay the deadline earlier this week but had not announced a new date.

The Senate bill omitted green measures the House had sought: A $1 billion program aimed at motivating airlines to sell off their least fuel efficient aircraft was removed from the bill, as were provisions aimed at ensuring labor representation on airline boards and efforts to ensure a $15 minimum wage, Davis said, calling it “one of the ways to get Senate Republican and White House buy-in.”

Davis said transportation may benefit from future stimulus bills aimed at stemming the impact of the pandemic.

“This is not the last word,” he said. “This is an attempt to stem the bleeding caused by lack of demand for transportation right now.”