How the Unprecedented Payroll Support Program Saved the Airline Industry
By ALPA Staff
In early March 2020, transportation labor unions gathered in Florida for the AFL-CIO’s Transportation Trades Department’s annual winter meeting. But the typical talk of improving worker power and the safety of transportation was overtaken by a more immediate crisis: COVID-19. In the span of a few weeks, COVID-19 had spread to the United States, and it appeared that passenger air travel, and much of the world, might be shutting down.
No one could have predicted the depth and duration of the pandemic, but without question the horizon was ominous: airlines were dramatically slashing capacity and talking possible bankruptcies across the globe. Within a few weeks, passenger air travel in the United States and Canada would drop to approximately 4 percent and 2 percent, respectively, of 2019 figures—a decrease never before seen. As a result, ALPA and other airline unions needed to respond quickly and with exacting detail to save aviation jobs and the industry.
In the modern era, every congressionally authorized industry- or company-specific relief package has, intentionally or otherwise, resulted in harm to employees or to their collectively bargained contracts and rights. From the 1979 Chrysler bailout to the restructuring of the so-called “Big 3” automakers to, most notably, the post-9/11 airline relief program, employees and collective bargaining have been either major targets or collateral damage in such efforts.
Following the 9/11 attacks, Congress passed the Airline Transportation Safety and Stabilization Act (ATSSA), which provided cash, loans, loan guarantees, and insurance—among other tools—to help stabilize the airline industry under the auspices of the government-run Air Transportation Stabilization Board. The legislation didn’t contain any employee protections, and airlines that were able to access the government assistance paid off their shareholders, with essentially no money flowing to frontline employees. The Air Transportation Stabilization Board used its credit instruments to wrest disproportionate wage and benefit concessions from workers, effectively entering the government into private-sector collective bargaining to upend labor contracts. The improperly drawn relief package was a major failure, dangerously intervening in collective bargaining and haphazardly distributing loans. Ultimately, most air carriers went bankrupt in the ensuing years, with massive attendant employee harm.
From this experience, ALPA and its congressional allies designed a new approach: the three-legged stool that is the payroll support program (PSP). They proposed that any relief package or “bailout” should be used to cover employee costs, preclude the government from interfering with collective bargaining, and prohibit any involuntary furlough of employees. The idea was to remove labor costs from airlines’ ledger sheets, keep pilots and other critical personnel on the payroll and ready to return to work once the industry and economy began to recover, and ensure that airline workers didn’t become another casualty of an “aid” package that failed to materialize. However, airlines came out in support of a package that included $50 billion in grants and loans and had no provisions to protect employees other than vague promises to retain employees devoid of any details or legal commitment.
After two weeks of all-out negotiations, the union position largely prevailed and the Coronavirus, Aid, Relief, and Economic Security (CARES) Act was secured. The bill provided two types of assistance to the industry. First, the bill provided payments of $32 billion in the form of grants to air carriers and contractors ($25 billion to passenger airlines, $4 billion to cargo airlines, and $3 billion to contractors). Second, the bill authorized the Treasury Department to make loans of up to $29 billion available to air carriers ($25 billion for passenger airlines and $4 billion to cargo airlines).
The use of the grant money was “exclusively” for frontline employee payroll and benefits, and both grants and loans provided six months of furlough protection as well as collective bargaining protections. Additionally, the CARES Act included a prohibition on stock buybacks and executive compensation caps. This important victory helped stave off furloughs and bankruptcies, but the airline industry and the world would soon run into a new reality: the pandemic’s continued persistence.
As the PSP was set to expire on Sept. 30, 2020, both small and large airlines issued tens of thousands of federally mandated notices to employees under the Worker Adjustment and Retraining Notice (WARN) Act, with the industry facing significantly reduced passenger demand. After the failure of both large-scale and industry-specific packages due to partisan divisions, tens of thousands of airline employees were furloughed as their future, including that of nonfurloughed workers, hung in the balance.
After months of tug and pull, the Consolidated Appropriations Act, 2021 passed on Dec. 27, 2020, and would remain in effect through March 31, 2021. In addition to providing $15 billion in passenger airline PSP grants, the bill included the first-ever federal recall of private-sector industry employees over the objections of certain industry employers. As part of the recall, which was spearheaded by ALPA, airline employees were compensated for lost pay and benefits and restored to their rights and protections “as if such employees had not been involuntarily furloughed.”
With the second relief package nearing its end and the Biden administration taking office, Congress passed the American Rescue Plan, a $1.9 trillion package that included $14 billion for passenger airline payroll PSP, furlough prohibitions until Sept. 30, 2021, and an ALPA proposal to ensure that airlines maintain employment levels past that date until the exhaustion of all PSP funds. During consideration of the bill, numerous detrimental Senate amendments were proposed, including one that would have instituted a salary cap and frozen pilot pay at reduced 2020 levels through 2023. Due to ALPA’s advocacy, all amendments detrimental to pilots and the PSP failed to be considered, and the package passed intact with enhanced furlough protections.
If not for this unprecedented program, the airline industry would be in tatters; industry bankruptcies, including Chapter 7 liquidations, would be likely; cargo and passenger throughput would be irreparably harmed; and potentially hundreds of thousands of unemployed pilots and other airline employees would be unable to respond to the now-increasing demand for air travel. With vaccine distribution accelerating and a broader economic recovery on the horizon, air travel today would still be at a standstill, with airlines attempting to rehire furloughed pilots in a slow effort to rebuild the industry. Airline employees would have likely faced similar outcomes to those employees in other pandemic-sensitive industries, including workers in the food service, leisure, and hospitality fields.
However, because of this novel program—which is the only industry-specific relief package that received three rounds of support from the federal government during the pandemic, the only one exclusively covering employee payroll, and the only one with specific collective bargaining protections—airlines, pilots, and the flying public are returning to the skies, and the horizon is looking bright.
This successful outcome is a testament to the tens of thousands of ALPA pilots who sent more than 130,000 letters to Capitol Hill urging support of the PSP and to ALPA’s labor allies, lasting relationships with pilot-partisan politicians, and ability to take lessons learned from the past and apply them to the present.
