With help from Brianna Gurciullo
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— With grant money finally on the way, airlines are gearing up to apply for a second round of government aid, this time in the form of loans.
— Several air carriers have been hit with lawsuits over their failure to give refunds for canceled flights due to the pandemic.
— Shifting demand and drivers getting sick have the trucking industry reeling, as a report obtained by POLITICO warns of a potential “freight cliff.”
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READY FOR ROUND 2: As more details trickle out on the grant agreements that airlines reached with the Treasury Department to boost their payrolls, the major carriers will now have to pivot to asking for loans. The department set an initial Friday deadline, our Brianna Gurciullo reports, meaning that airlines, repair stations and ticket agents have by then to apply if they want to be considered ASAP. At least two major carriers — American Airlines and Alaska Airlines — are planning to seek loans. According to Reuters, several others are, too.
About those grants: United on Wednesday said it’s expecting $5 billion in payroll assistance. Like other airlines, 30 percent of the total would be a loan. And parent company United Airlines Holdings will issue warrants to Treasury for the purchase of about 4.6 million shares of common stock. But United is still planning for its workforce “to be smaller than it is today, starting as early as October 1,” CEO Oscar Munoz and President Scott Kirby said Wednesday night. United expects “to fly fewer people during the entire month of May than we did on a single day in May 2019.” And “while we have not yet finalized changes to our schedule for July and August, we expect demand to remain suppressed for the remainder of 2020 and likely into next year,” Munoz and Kirby said.
THE ONLY WAY TO GO IS UP? Meanwhile, the CEO of American Airlines on Wednesday said federal assistance will provide more than enough financial support, as long as demand picks up later this year. American’s revenues are 90 percent lower than this time last year, and Doug Parker said it “feels like” his industry has hit bottom in terms of passenger demand. “So the real question is: How long do you stay at the bottom, and when do we begin to recover?” Parker said on CNBC.
It will depend on “when people feel comfortable,” when tourist attractions like Disneyland reopen and when shelter-in-place orders and business travel restrictions are withdrawn, Parker said. However, he added that “we’ve started to see bookings outside of 90 days start to tick up a little bit,” which “seems to be a little bit of an indication that maybe our country’s ready to get moving again.”
Parker also said American doesn’t intend to defer or cancel orders for new planes.
American was the latest major carrier to ask for exemptions from the minimum service requirements on which aid is conditioned, including requesting that it be exempt from some flights to Hawaii and service to Duluth, Minn.
A BUSY TIME FOR LEGAL DEPARTMENTS: Some airline lawyers have presumably been involved with parsing the CARES Act, H.R. 748 (116), and the guidance coming out of Treasury. But others have had a different task: preparing to respond to lawsuits. As our Tanya Snyder reports, customers have started to sue airlines over their insistence on issuing credits instead of refunds for canceled flights amid the pandemic
So far, Southwest, United, Spirit and several Canadian carriers have been slapped with lawsuits. The Southwest complaint, filed Monday, argues that both federal law and Southwest’s own contract of carriage requires a full refund. And the suit against United notes that it changed its own cancellation policy four times within a seven-day period in March.
A CARES ACT AIRPORT CASE STUDY: An informative story from friend of the newsletter Ethan Genter in the Cape Cod Times shows how airports are responding to the grants they received under the $10 billion pool in the CARES Act. Barnstable Municipal Airport in Hyannis, Mass., got a nice surprise when the numbers came out this week: $18 million, which left the airport’s manager “shocked,” according to the Times story. The sum is more than double the airport’s planned fiscal 2021 budget and is more than what went to the much larger Manchester-Boston Regional Airport, which enplaned almost 50 times as many passengers in 2018.
The FAA explained in a statement: “The number of enplaned passengers is only one of several metrics used to determine an airport’s business and financial situation. Comparing the final allocations among airports based solely on enplanements does not accurately reflect the totality of factors included in the formula as required by the statute.” Other factors in the formula include debt service and unrestricted airport reserves.
HAULERS HURTING: The trucking industry is nearing a “freight cliff” as trucking volume drops, and its leaders are weighing whether or not they’ll have to ask for help from the government, your MT host reports. A report commissioned by FEMA and obtained by POLITICO paints a grim picture of sick drivers and wild shifts in demand. “Financial stress is now certain for most carriers and acute for those serving non-essential sectors,” the report asserts.
The trucking sector hasn’t had to ask for targeted financial aid yet, largely because so many of its companies are small businesses or independent drivers, many of whom have been able to benefit from the small business assistance that was already included in the CARES Act and handed out swiftly by the Treasury Department. But such an ask may be in the cards in the future; the American Trucking Association, for example, might consider lobbying for things like trucking-specific low-interest or no-interest loans, said ATA’s Bill Sullivan.
— “Rolling through the pandemic.” New York Times.
— “Gig workers struggle to claim unemployment relief.” POLITICO.
— “Tesla, Musk must face shareholder lawsuit over going-private tweet.” Reuters.
— “How GM and Ford switched out pickup trucks for breathing machines.” The Verge.
— “Airlines have the cash. Now they need passengers.” Wall Street Journal.
DOT appropriations run out in 167 days. The FAA reauthorization expires in 1,263 days. Highway and transit policy is up for renewal in 167 days.
