Airline employees see threat to stimulus wage support provision

The bill provides $25 billion to passenger airlines in payroll grants to help keep employees on the job

People 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 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 April 2, 2020 at 4:24pm

Flight attendants are worried that a provision in the coronavirus stimulus law passed last week will throw a wrench into the payroll grants that they are relying on to keep airline employees afloat.

The stimulus bill signed by President Donald Trump last week includes a measure providing $25 billion to passenger airlines in payroll grants to help them keep employees on the job.

Under the provision, airlines can ask for the equivalent of their payroll between April 1 and Sept. 30 of last year, and companies that accept grants would be barred from cutting pay or benefits or enacting involuntary furloughs until Oct. 1.

But the money comes with other strings as well: Airlines receiving the grants may be asked to provide “warrants, options, preferred stock, debt securities, notes, or other financial instruments issued by recipients” in exchange for the cash grants as compensation for the aid. In essence: The government is required to ask companies to turn over equity or stock in order to receive a cash grant.

By requiring companies to pay the grants back, the provision effectively turns the grants into loans and would likely make airlines less inclined to accept them, argues Sara Nelson, international president of the Association of Flight Attendants-CWA.

She said the provision was tucked into the bill at the last minute, but “there was an understanding” that the federal government wouldn’t ask for equity or warrants because “then it wouldn’t be grants.”

But subsequent guidance from the Treasury Department made it clear that airlines would be required to lay out those financial instruments as part of their grant applications. The applications are due Friday.

Treasury did not respond to a request for comment.

Airlines have been clobbered by the pandemic. Nelson said while 20 percent of the airline industry was furloughed after the Sept. 11 attacks, the number idled by the pandemic may be closer to 90 percent by May.

“There is no industry left,” she said. “That is how severe it is. And putting warrants on the grants puts that all in jeopardy.”

Treasury Secretary Steven Mnuchin has consistently argued that help for airlines should come with strings. The $25 billion in loans for passenger airlines, too, come with restrictions, he said.

“I’ve been very clear this is not an airline bailout,” he told Fox Business. “And that taxpayers need to be compensated for relief they’re giving to airlines.”

Still, labor groups representing airline workers say they’re determined to stop the grant restrictions.

In a letter to Mnuchin on Wednesday, representatives of the Association of Flight Attendants, which represents 20 airlines, the Association of Professional Flight Attendants, which represents American Airline Flight Attendants, and the Transport Workers Union of America 556, which represents Southwest, wrote that the provision “threatens whether workers will ever see the promised relief.”

“If the airlines were required to pay back the grants in full with an equity position of $25 billion, that would give the government the equivalent of a 40 percent stake in airlines in exchange for keeping workers on the payroll for six months,” they wrote. “This effectively renders the payroll grants a poison pill that will cost us our jobs and push us onto taxpayer-funded unemployment insurance — the opposite of what this bipartisan agreement intended.”

They argued that the grants were intended to ensure that airlines kept workers on payroll. "Keeping people on the job is the only reason why these grants were created,” they wrote. “While we believe that the Treasury Department should get a good return for taxpayers on its loans to the airlines to address non-payroll expenses, we ask you to act in good faith to protect our job and integrity of the payroll grants program.”

Democrats appear sympathetic to their concerns. In a conference call with reporters Wednesday, Rep. Peter A. DeFazio, D-Ore., said while it was “fine” to put conditions on loans offered to the airlines for operations.

“Take your pound of flesh,” he said of Mnuchin. “But don’t slow down the payroll assistance, which is what he is in the process of doing now.”

Speaker Nancy Pelosi, D-Calif., said the grants were supposed to go “directly to the employee.”

“We just don’t want to hold it up,” she said.