Airline leaders grilled over safety, refunds and use of loans

Lawmakers concerned airlines are not working hard enough to regain consumer trust

Nicholas Calio, president and chief executive officer of Airlines for America, arrives to tesify at a Senate Commerce, Science and Transportation Committee hearing Wednesday. (Bill Clark/CQ Roll Call)
Nicholas Calio, president and chief executive officer of Airlines for America, arrives to tesify at a Senate Commerce, Science and Transportation Committee hearing Wednesday. (Bill Clark/CQ Roll Call)
Posted May 6, 2020 at 6:45pm

Airlines that received billions of federal dollars after the coronavirus decimated their industry are now facing deep scrutiny over their handling of the pandemic, with lawmakers grilling them Wednesday about passenger safety, refund policies and their use of the money Congress allocated to keep employees on the payroll.

“In effect, you are, forgive me, screwing the very taxpayers whose very money is going into your pockets,” said Sen. Richard Blumenthal, D-Conn., during a hearing of the Senate Commerce, Science and Transportation Committee on aviation oversight. 

The roughly $2 trillion coronavirus aid bill that Congress cleared in March included $31 billion in payroll support grants, including $25 billion for passenger airlines, $4 billion for cargo airlines and $3 billion for airline workers and contractors.

But lawmakers on the Senate panel Wednesday said they were worried that airlines were not working hard enough to regain consumer trust, citing several examples of ways carriers fell short.

Blumenthal said airlines had not been sufficiently flexible in offering refunds to passengers who canceled flights over concerns about the pandemic. Delta, American and United are among the airlines that have been sued by passengers who sought refunds for flights they did not want to take because of the pandemic. 

“You are killing the goose that lays the golden egg for you,” he said.

Nicholas Calio, president and chief executive of the industry group Airlines for America, defended airlines’ decision to offer vouchers instead of refunds, saying his members “strictly follow and comply with all federal laws and regulations on this matter and when a refund is due under those regulations, carriers promptly provide them.”

Under current regulations, passengers who cancel their own flights are entitled to a voucher depending on the type of flight they purchased, while airlines that cancel flights are obligated to offer a cash refund.

Bleeding cash

He said airlines are bleeding cash, and said if air carriers refunded all tickets, they would go bankrupt. Airlines are losing between $350 million and $400 million “every single day of the week” and when they do recover, he said, “the industry will emerge a shadow of what it was on March 1 of this year.”

U.S. airlines have grounded more than 3,000 aircraft, which is nearly 50 percent of the active fleet, because of the pandemic and collectively are burning more than $10 billion in cash per month, he testified.

Senators were also critical of Frontier Airlines’ May 4 announcement that it would guarantee the middle seat would remain empty for a fee starting at $39 per passenger per flight. The decision provoked a rebuke Wednesday from House Transportation and Infrastructure Chairman Peter A. DeFazio, D-Ore., who called the move “outrageous.”

“Frontier’s decision to charge passengers to keep middle seats empty is capitalizing on fear and passengers’ well-founded concerns for their health and safety,” he said.

Sen. Amy Klobuchar, D-Minn., said she did not “think it’s appropriate” for Frontier to charge for social distance, saying not all passengers could afford to pay a fee that would help keep them safe.

She asked if there should be a rule put in place to prevent such charges. 

Invisible hand

Calio, who said Frontier was not a member of his organization, said airlines in his organization were working to create social distance when possible on flights. He said he didn’t think airlines would need such a rule to offer social distance.

“Hopefully the marketplace will take care of that,” he said.

“Ugh,” Klobuchar said. “Well, it didn’t with Frontier,” she said.

Sen. Maria Cantwell, the ranking Democrat on the committee, meanwhile, said she was concerned about airlines that cut employee hours despite receiving payroll support dollars. 

The $31 billion in payroll support grants was contingent on the requirement that airlines accepting the money were not permitted to cut workers or benefits.

Because so many airlines asked for grant money, the Treasury Department could only support about 76 percent of what airlines offered in payroll between April and September of last year, meaning some airlines were forced to cover the difference. 

Delta, which announced it would accept $5.4 billion in payroll assistance, United, with $5 billion and JetBlue $935 million under the bill, have been among the airlines to announce plans to reduce hours. 

JetBlue, in a statement, said that because the law only covered about 76 percent of what airlines pay in payroll, it was forced to take actions “that will help us preserve jobs when the payroll support funding ends.” 

It will ask those in salaried and administrative positions to take 24 days of unpaid time through Sept. 30, the equivalent of one day per week. 

United, however, backed away from an earlier plan to mandatorily cut hours Wednesday, saying it would instead ask employees to volunteer to reduce their working hours, with involuntary schedule cuts following if not enough people volunteer. 

“United backing off what it was trying to do with forced hour reduction is right,” Cantwell said. “I hope JetBlue and Delta are going to do the right thing.”

She said she, Sen. Sherrod Brown, D-Ohio, and Senate Minority Leader Charles E. Schumer, D-N.Y., planned to write to Treasury Secretary Steven Mnuchin to “clarify that mandatory or forced reductions in payroll hours is not what the CARES Act intended.” 

In a letter to Committee Chairman Roger Wicker, R-Miss., and Cantwell, Sara Nelson, president of the Association of Flight Attendants-CWA, AFL-CIO wrote that the Treasury Department has not yet responded to requests for guidance to carriers to advise that cutting hours is a violation of the grant program. 

“Their silence on this issue, which guts the core of the program, is deafening,” Nelson wrote.