CARES Act Payroll Support to Air Carriers and Contractors

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.

Source: CARES Act Payroll Support to Air Carriers and Contractors