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US Airlines Get $15 Billion Lifeline

This week’s $900 billion stimulus package includes another round of payroll support

December 31, 2020

The latest coronavirus stimulus bill signed by President Donald Trump this week includes $15 billion for the faltering airline industry, part of a $900 billion package aimed at shoring up the US economy as COVID-19 cases continue to spike.

The airline aid package is on top of the $50 billion domestic carriers got from the $2 trillion CARES Act passed earlier this year. Domestic carriers which took payroll support then were prohibited from laying off employees until after the first round of funding expired at the end of September. At that point, the airlines furloughed about 32,000 employees.

Under the new bill, airlines which receive this government aid will not be allowed to furlough employees before the program expires March 31. They are also required to recall employees who were previously furloughed after the first stimulus package expired in October and give them back pay.

The measure also includes contract workers such as catering employees and airport staff not directly employed by an airline.

In addition to extending payroll support, the bill limits airline executive compensation and stock buybacks. The act also restores some air connectivity as it requires airlines receiving aid to maintain at least some service to the cities they served before March 1, 2020.

The airline industry welcomed the news, with Southwest Airlines saying it would cancel plans it announced previously o furlough workers for the first time in the carrier’s history.

Southwest had warned 7,000 employees that they would face furloughs in the early spring unless their unions agreed to temporary wage cuts. In a letter to employees, CEO Gary Kelly thanked congressional leaders of both parties and Treasury Secretary Steve Mnuchin for passing the legislation.

“As I’ve been saying for months, [government stimulus] was always our preferred plan, and it means we can stop the movement toward furloughs and pay cuts that we previously announced,” Kelly said in an employee update this week.

Executives at United, however, warned that furloughs would likely be back after March as travel demand isn’t expected to pick up by the time the act’s provisions expire.

“United has been realistic about our outlook throughout the crisis, and we’ve tried to give you an honest assessment every step of the way,” said United’s CEO Scott Kirby and president Brett Hart in a message to employees.

“The truth is, we just don’t see anything in the data that shows a huge difference in bookings over the next few months. That is why we expect the recall will be temporary.”

Although more airline layoffs may be back on the table in April in the absence of an additional round of stimulus, there are indications that air travel demand could return faster than expected, as demonstrated by the relatively high numbers of passengers being screened in US airports over the holidays.

Perhaps more critical, distribution of the first COVID-19 vaccines is now underway, which many travelers see as critical to ending the pandemic and returning confidence in travel.