Airlines Used Cares Act Funds To Pay Workers. Airline Contractors Took The Money And Let Workers Go, Report Says

In the months after Congress allocated of hundreds of millions of dollars to keep airline industry employees working, passenger airlines applied for shares of that money and then then laid off less than 1% of their workers, until the funding ran out.

Airline contractors similarly applied for money and then laid off about 58,000 people, about 35% of their workers, a new report says.

“Contrary to congressional intent, Treasury permitted aviation contractors to lay off thousands of workers and receive full payroll support calculated based on the companies’ pre-pandemic workforce,” according to a report, released Friday by the House Select Subcommittee on the Coronavirus Crisis.

The report, “Unnecessary Costs: How the Trump Administration Allowed Thousands of Aviation Workers to Lose Their Jobs,” was issued by the House Select Subcommittee on the Coronavirus Crisis.

It blasted both the slow pace of work by the Treasury Department and airport contractors’ allocation of the funds they received.

“This staff report documents how the Department of the Treasury’s implementation of the Payroll Support Program (PSP) caused thousands of workers at aviation contractors to lose their jobs,” said the introduction to the report.

“Documents uncovered during the Select Subcommittee’s investigation show that aviation contractors sought to avoid ‘unnecessary costs’ by terminating employees before executing PSP agreements,” the introduction continued.

In comparison with passenger airlines, “Aviation contractors reported conducting 57,833 layoffs and furloughs prior to applying for PSP assistance—more than 17 times the number reported by passenger air carriers,” the report said.

The Cares Act was approved by Congress on March 27. The report makes a distinction between the 57,833 layoffs and furloughs before PSP applications were filed under the act, and the16,655 layoffs between the dates when filing opened around April 2 and when the companies completed their applications, mostly in June or July.

It is not clear whether the numbers overlap. The process was plagued by long delays, during which some companies expressed frustration. Some workers had hours cut or were temporarily laid off prior to April 2, but were not fully or formally laid off until later. They may be counted twice.

Before the coronavirus crisis, labor union Unite Here represented about 16,000 workers at airline catering subcontractors. Close to 6,000 of those workers were laid off between March and the time when the contractors received Payroll Support Program funds, said Unite Here spokesman Kyle Schafer.

Unite Here said it thanks the subcommittee for the “exposing how the Treasury took a law meant to support working people and distorted it to support corporate bottom lines instead. Unfortunately, the report’s findings are no surprise to the thousands of airline catering workers who lost their jobs months ago. “

Schafer noted that Unite Here also represented 2,500 kitchen workers employed by United Airlines. Those workers generally retained their jobs until Sept. 30, paid with funds from the Cares Act.

The subcommittee report details the responses of the four major aviation contractors with the most layoffs after filing PCP applications. The four received about $499 million in anticipated payroll support but laid off 14,434 workers, the report said.

Switzerland-based Gate Gourmet had 7,160 of the 16,665 known layoffs/furloughs following its PSP application opening. It received $171 million in payroll support, the second highest award to any aviation contractor. Eventually, the company furloughed, laid off, or reduced hours for roughly 85% of its workforce, the report said.

Gate Gourmet had expected funding within eight days of applying, but instead waited 75 days. “The company expressed frustration at Treasury’s slow speed and the uncertainty the delays caused,” the report said.

“After receiving the PSP funds, unlike other contractors, Gate Gourmet brought back some of its workers,” the report said. “It recalled approximately 900 workers and gave additional hours to approximately 1,200 part-time workers. Thousands of employees remained out of work, but on July 15, 2020, Gate Gourmet decided to return management to full salaries— retroactively”

Swissport, owned by Chinese company HNA Group, laid off or furloughed 3,873 workers, the second highest total, following its PSP application opening, “Despite its significant layoffs, Swissport never implemented any cuts to executive compensation,” the report said.

After receiving $170 million, the third highest award, in July, Swissport “did not recall a single worker based on its receipt of PSP funds,” the report said. Rather, the company said it plans to use the money to cover future payroll expenses.

Chicago-based Flying Food Fare received $85 million and laid off or furloughed 2,037 workers, the third highest total.

The report said Flying Food Fare averaged 5,737 workers in 2019. By the end of March, more than 90% were furloughed, laid off or had hours reduced, and senior management took reduced pay. The company “repeatedly expressed frustration with Treasury’s delays, explaining that they were ‘anxious to close this out’ so the business would remain viable,” the report said.

Despite receiving $85 million in payroll support, FFF did not rehire a single one of its laid off or furloughed employees based on the receipt of PSP funds.  Rather, it said it would rehire employees as business increased.

Prospect Airport Services Inc., based in Des Plaines, Illinois, received $73 million in total anticipated payroll support and laid off 1,364 workers. The German company LSG Sky Chefs received the highest amount, $214 million, of total anticipated payroll support. LSG Sky Chefs had 349 known layoffs, the report said.

Over the weekend, Gate Gourmet, Swissport, Prospect, and Flying Food Fare did not respond to emails seeking comment.

The paths that led to substantial numbers of involuntary layoffs and furloughs were not inevitable.

Another company, Irving, Texas-based G2, which received $81 million in anticipated funded, was commended in the report. In March, G2 furloughed 2,187 employees at 41 airports, cut pay for 219 managers and reduced the salaries of its four senior executives to zero.

On April 1, G2 instituted a no-furlough policy, saving an estimated 3,000 jobs, saying it wanted “to abide by the spirit of the CARES Act.” In June, it provided lump sum payments to employees to restore or partially restore missed compensation. The CEO, however, remained at zero compensation.


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