CARES Act Payroll Support to Air Carriers and Contractors — IN11482 (September 15, 2020)

Summary

This Congressional Research Service Insight, IN11482 updated September 15, 2020 and written by Rachel Y. Tang, describes the payroll support program for aviation workers in Section 4112 of the CARES Act (P.L. 116-136). The law provided $32 billion: up to $25 billion for passenger air carriers, $4 billion for cargo air carriers and $3 billion for contractors, based on each recipient's payroll expenses from April through September 2019. Treasury data show that by early September 2020 more than $27 billion had been approved for 595 recipients: 343 passenger airlines, 36 cargo carriers and 216 contractors. As of September 3, 2020, about 97% of the passenger airline funds had been committed, against nearly 79% for contractors and about 17% for cargo carriers. The Insight states that September 30, 2020 is not the date the payroll support benefit expires.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

INSIGHTi

CARES Act Payroll Support to Air Carriers
and Contractors

Updated September 15, 2020
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136), signed into law on
March 27, 2020, provided assistance to consumers and businesses, including aid to air carriers and
eligible contractors. Emergency funds also were provided to eligible airports. Assistance to air carriers in
Division A, Title IV of the CARES Act included loans and loan guarantees, funds to support the pay and
benefits of air carrier workers, and a suspension of aviation excise taxes on air transport of people, cargo,
and aviation fuel through calendar year 2020. This Insight focuses on the payroll support program (PSP).
Section 4112 of the CARES Act provided $32 billion in payroll support to aviation workers. From this
amount, the Secretary of the Treasury was authorized to provide up to
 $25 billion for passenger air carriers (any air carrier that, during the period from April 1,
2019, to September 30, 2020, derived more than 50% of its air transportation revenue
from the transportation of passengers);
 $4 billion for cargo air carriers (any air carrier that, during the period from April 1, 2019,
to September 30, 2020, derived more than 50% of its air transportation revenue from the
transportation of property or mail, or both); and
 $3 billion for contractors who provide ground services directly to air carriers, such as
catering services or on-airport functions.
The law specified that the amount received by each air carrier or contractor was to be based on its payroll
expenses for the six-month period from April through September 2019, and that the payroll support funds
must be used exclusively for continuing the payment of employee wages, salaries, and benefits. The law
also required that air carriers or contractors receiving payroll support must refrain from conducting
involuntary layoffs or furloughs or reducing pay rates and benefits from the day the payroll support
agreement was executed until September 30, 2020.
According to the CARES Act, air carriers and contractors receiving payroll support also must comply
with other program terms and conditions, including continuation of certain air service deemed necessary
by the Secretary of Transportation, refraining from stock buybacks or dividend payments through
September 30, 2021, and limiting the compensation of highly paid employees until March 24, 2022.

Congressional Research Service
https://crsreports.congress.gov
IN11482

CRS INSIGHT
Prepared for Members and
Committees of Congress
Congressional Research Service 2

Administered by the U.S. Treasury, PSP has generated considerable interest from airlines and contractors.
Treasury data show that, by early September 2020, more than $27 billion in payroll support had been
approved for disbursement to 595 recipients, including 343 passenger airlines, 36 cargo carriers, and 216
contractors.
Although Treasury set April 27, 2020, as the deadline for PSP applications, it agreed to accept and
consider applications beyond the deadline, subject to the availability of funds. Program data indicate that
Treasury accepted and approved applications in the months after the original deadline, as shown in Table
1.

Table 1. CARES Act Payroll Support Program (PSP)
(As of September 3, 2020)
Passenger Airlines Cargo Airlines Contractors Total

1 st Agreement Date 04/20/2020 05/08/2020 05/15/2020 N/A
Number of Recipients 343 36 216 595
PSP Amount $24,262,454,538 $664,914,086 $2,368,471,923 $27,295,840,547

Source: CRS analysis of U.S. Treasury CARES Act Payroll Support Program data (as viewed on September 14, 2020).

Treasury data indicate that the first group of agreements was reached with a number of passenger airlines
on April 20, 2020, and about 74% of the passenger airlines payroll agreements occurred in April and May.
The first batch of agreements with cargo airlines was reached on May 8, 2020, followed by contractors in
mid-May (Table 1). Contractors’ payroll support agreements were disbursed relatively evenly in May,
June, and July. The timing of PSP agreements suggests that passenger airlines were the first group
affected by the abrupt drop in air travel as a result of the COVID pandemic, followed by aviation
contractors downstream. Air cargo carriers have been less affected.
The data also indicate that, as of September 3, 2020, about 97% of the $25 billion appropriated for payroll
support to passenger airlines was committed, compared with nearly 79% of the $3 billion for contractors,
and about 17% of the $4 billion for cargo carriers. This also appears to agree with reports that cargo
carriers have been faring better than passenger airlines.
As one of the PSP requirements prohibits involuntary furloughs or pay-rate reductions through September
2020, many airlines have asked employees to voluntarily take a leave of absence and/or begun to offer
voluntary separation packages. Airlines also have warned employees about possible furloughs in October.
Aviation union groups have been advocating for more federal aid.
However, September 30, 2020, is not the date that the payroll support benefit expires. There is no
deadline for a recipient to expend payroll support funds, as long as they are exclusively for the
continuation of employee wages, salaries, and benefits, as stated in a Treasury document. Since many
payroll support agreements were approved and executed in May, June, July, or later, many recipients
(employers) are likely to have funds available for payroll support beyond September 30, 2020.
Meanwhile, airlines have been accessing additional capital in private markets.
PSP has helped airlines and contractors to temporarily avert mass layoffs and furloughs due to the
unprecedented drop in business. The number of passengers on U.S. airlines in April 2020 was 96% lower
than in the same month in 2019. The number of U.S. airline passengers in early September 2020 remains
at about 65% lower than the 2019 level, and air travel is not expected to fully recover to pre-pandemic
level for years. Congress could consider augmenting, extending, or reallocating undistributed PSP funds
to passenger carriers that need more assistance. However, without immediate and significant
improvement in passenger traffic, airlines may not have sufficient business to sustain current employment
Congressional Research Service 3

levels even with short-term payroll assistance from the government. It is likely the airlines will need to
restructure for survival and long-term growth.

Author Information

Rachel Y. Tang
Analyst in Transportation and Industry

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff
to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of
Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of
information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role.
CRS Reports, as a work of the United States Government, are not subject to copyright protection in the United
States. Any CRS Report may be reproduced and distributed in its entirety without permission from CRS. However,
as a CRS Report may include copyrighted images or material from a third party, you may need to obtain the
permission of the copyright holder if you wish to copy or otherwise use copyrighted material.

IN11482 · VERSION 2 · UPDATED

File and source

File: IN11482.2.pdf
Size: 675,789 bytes
SHA-256: f7ae7b661ea4b9268cbc6e8ed395eb711c4fce9edd67323ed721c1d277fc8fc7
Our copy: IN11482.2.pdf
Original: crsreports.congress.gov