There’s a lot of misinformation out there about how the new CARES Act covers airline employee wages, who it covers and for how long. Also the regulations airlines must follow if they accept any funding. So I thought I’d break it down.
* Although largely negotiated by flight attendant and pilot unions, the benefits provided in the CARES Act does extend to every airline, union or not so long as the airline accepts Government funding during the pandemic.
If an airline takes funding through the CARES Act/Stimulus plan they also receive Financial Assistance for Employee Wages, Salaries and Benefits. The airline will receive funds that can only be used for the continuation of paychecks for all airline employees at air carriers, cargo carriers and contract companies.
According to the Bill, the amount the airline will receive will be based on their payroll from April to September of 2019 as previously reported. However, if their payroll costs are higher than reported they can show financial documents to obtain the difference.
In order to receive payments and assistance of any kind airlines have to agree to certain terms and conditions. We already know that Southwest Airlines is offering a partially paid leave of absence as to not agree to some of these terms.
- Airlines cannot involuntarily furlough employees or cut pay rates through September 30, 2020. This deadline can be extended through further Acts/Bills.
Through September 2021, the following is in place:
- The airline, contractor of affiliate of either cannot purchase stock in the airline on the stock market.
- The airline or contractor cannot pay dividends to shareholders.
The Act also states that the Secretary of Transportation can require, to the extent reasonable and practical, that an airline who is provided financial assistance maintain scheduled air service up to the level of service served by the airline before March 1, 2020. This is to protect smaller communities that have had all airline service cut amid the COVID-19 pandemic, and also to protect the movement of U.S. mail and health supplies. This stipulation expires March 1, 2022.
There are no conditions that would stop the airline from taking funds and also negotiating with a union.
Now here are the stipulations that effect airline CEOs & Vice Presidents: no air carrier or contractor, after they enter into an agreement for funds, for a period of two years beginning March 24, 2020 to March 24, 2022, may pay anyone who makes more than $425,000 a year a salary that exceeds what they made in the year 2019.
Should an employee leave the airline during this time who fits the criteria, they cannot receive severance by way of pay or benefits that exceeds twice the maximum compensation they received in 2019.
For airline CEOs: No officer or employee who makes more than $3,000,000 a year in 2019 may receive more money that exceeds: $3,000,000 and 50 of the excess over $3,000,000 earned in 2019. Here’s an easy example: If an airline CEO made $4,000,000 last year and they take funding from the Government for the next two years their salary would be $3,500,000. And Total Compensation is defined as: salary, bonuses, awards of stock and any other financial benefit.
If you would like to read the sections devoted to airlines and airline employees you can read them in full below:
Comments & Discussion
New United CEO Scott Kirby Comes Out Firing
United Airlines’ Scott Kirby, who took over as CEO last week in the wake of Oscar Munoz’s retirement, is wasting no time establishing his authority.
Kirby cut 13 high-level executives in a cash-saving move on Friday as the coronavirus pandemic has throttled the industry financially. A day earlier, he told an online investor conference that the airline absolutely would not declare bankruptcy, and that he thought flying was safe enough to not block the middle seats on planes from being sold.
Well, he did build a reputation as an open – some might say abrasive – executive while at American Airlines.
Kirby is eliminating 13 of United’s 67 officer positions, all effective on Oct. 1. That’s the day after the restrictions on firing employees runs out per the federal government’s rules for airlines accepting billions of dollars in stimulus package grants and loans.
“While there are glimmers of good news in our July schedule — we expect to be down about 75% versus 90% right now — travel demand is still a very long way from where it was at the end of last year and the financial impact on our business remains severe,” United said in a written statement as reported by CNBC.
The cuts are in response to the loss of nearly 90 percent of business for United and all airlines, as the demand for travel has dropped dramatically compared to last year and beyond.
But Kirby defiantly said during the investor conference a day before that he has no plans for the airline to go bankrupt.
“Zero percent, no chance,” Kirby said. “It’s worse for shareholders. It’s worse for creditors. It’s worse for employees. It’s worse for every constituent that we have.”
To that end, Kirby also said he won’t sacrifice potential sales by blocking middle seats, as some airlines have done. As the blog The Points Guy noted, Kirby said the airline’s cleaning process, air circulation and a requirement for passengers and crew to wear face masks make it a safe experience.
“Airplanes don’t have social distancing — we’re not going to be six feet apart,” he said. “But an airplane environment is incredibly safe.”
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