Lawmakers Urge Mnuchin Against Onerous Aid Terms

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American Airlines passenger aircraft occupy a runway where they are parked due to flight reductions to slow the spread of coronavirus disease (COVID-19), at Tulsa International Airport in Tulsa, Oklahoma, United States United, March 23, 2020.

Nick Oxford | REUTERS

Major congressional Democrats on Sunday urged Treasury Secretary Steven Mnuchin to quickly strike deals and not impose onerous conditions on $ 25 billion in wage subsidies for airlines hit by the coronavirus pandemic.

Last month, Mnuchin said that taxpayers should be “compensated” for aid to the airlines. Treasury directives say the department has said it may demand warrants, options, preferred shares or other securities in exchange for the grants. But members of the industry, unions and others have argued that if the Treasury Department is too aggressive in its demands, for example by insisting on large holdings, it could deter airlines from taking the subsidies.

In addition to wage subsidies, Congress also approved $ 29 billion in loans to passenger and freight airlines last month as part of the historic $ 2,000 billion coronavirus aid.

“The intent of this program was very clear: to keep American aviation professionals working hard in their jobs through direct payroll payments from the Treasury Department,” wrote Speaker of the House Nancy Pelosi, the Senate minority leader Charles Schumer and other high-level Democrats.

“We are concerned that the recent Treasury Department directives on the” Airline Industry Payroll Support “program do not fully reflect the intent of Congress,” they wrote.

Last Friday, the Department of the Treasury advised airlines requesting wage subsidies to submit their proposals. Airlines, including Delta, JetBlue, American, United and Spirit, said they had asked for some help. They did not disclose the amounts requested or the structure they proposed.

The airlines and the Treasury will now enter into negotiations, during which legislators have declared that the Treasury must be judicious in its requests.

“The aid must not be accompanied by unreasonable conditions which would oblige an employer to choose bankruptcy instead of providing wage subsidies to his workers,” wrote Pelosi, Schumer, as well as representative Peter DeFazio, D-Ore, Chairman of the committee of the Chambre des transports. and Infrastructure and Senator Sherrod Brown, D-Ohio, senior member of the Senate Committee on Banking, Housing and Urban Affairs.

“While we appreciate the Department’s desire to seek” warrants “in exchange for payroll assistance, we do not support any effort that would adversely affect the ability of an aviation worker to receive direct assistance to payroll, ”added lawmakers.

The letter comes after Senator Schumer and other high-level Democrats also called on Mnuchin to protect the oversight function of the $ 500 billion bailout fund created under the $ 2 trillion deal. Mnuchin was a key figure in these negotiations and will help manage the $ 500 billion fund. The Democrats said they would closely monitor all the money distributed by the rescue fund, including aid to airlines.

The Treasury Department did not immediately return a request for comment.

The gloomy forecasts of the airlines

Even with subsidies that could keep their estimated 750,000 workers detained and paid until September 30, airlines are trying to reduce demand for travel because of the virus. The virus, which has infected more than 300,000 people in the United States, and tough measures to prevent it from spreading further should limit demand in the coming months, officials said.

Delta CEO Ed Bastian said Friday that the airline had asked for its share of the workers’ subsidies, but warned that more funds were needed.

“But these funds alone are not enough,” Bastian wrote to employees, adding that the carrier expects revenues to drop 90% in the second quarter this year. “Without the self-help measures we are taking to cut costs and raise new funding, that money would be gone by June. “

These actions Delta and its competitors are taking to cut networks, park hundreds of planes, and ask thousands of employees to take unpaid or partially paid vacation time.

President Donald Trump reported last week that his administration plans to restrict domestic flights from coronavirus hotspots, but his administration has not issued such an order and the airlines are making their own cuts.

United Airlines said on Saturday it will cut service to its Newark hub from 139 daily flights to just 15, and New York LaGuardia Airport from 18 to two daily flights for the next three weeks.

“Although New York and New Jersey are the main COVID-19 hotspots today, we will also be monitoring the situation on the ground at stations across our network and will assess additional mitigation measures that we can take in those places too, “Greg Hart, United’s Director of Operations wrote to employees Saturday. Local United employees will continue to be paid benefits despite the reduction, said Hart.

On Friday, the CEO of JetBlue told his employees that the company is spending $ 10 million a day because the carrier spends more than it earns. The airline said its April capacity would be 70% lower than a year ago, with major outages in and around New York City.

United, Delta and JetBlue offered free flights to medical volunteers.

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