By Nathalie Voit
On Wednesday, Dec. 15, the Senate Committee on Commerce, Science, and Transportation hosted a hearing titled “Oversight of the U.S. Airline Industry.” Senator Maria Cantwell (D-WA) chaired the event.
In her opening statement, Sen. Cantwell outlined the “immediate question” before the committee: whether the Payroll Support Program (PSP) created to protect the airline industry was successful.
Congress instituted PSP as part of the broader Coronavirus Aid, Relief, and Economic Security (CARES) Act of March 2020. The program was designed to offset losses to the commercial airline industry and protect airline workers from unemployment. According to Sen. Cantwell, the program was a “historic investment” to prop up the crucial airline industry, which accounts for 5% of the country’s GDP and contributes $1.8 trillion in economic activity. She said that by providing much-needed funding to the industry, the relief saved “386,200 direct full-time U.S. passenger airline jobs,” or approximately 85% of the pre-pandemic workforce.
Committee ranking member Sen. Roger Wicker (R-MS) also credited Congress for acting “boldly” and preventing the industry from outright collapsing.
He noted two important aspects of the program: 1) It required airlines to continue serving all the markets they served pre-pandemic, regardless of demand, and 2) The aid covered pay and benefits for front-line workers, pilots, flight attendants, gate agents, and service contractors but not senior management.
“PSP was a necessary lifeline, not a windfall,” that saved nearly 400,000 direct passenger airline jobs, Sen. Wicker said in his opening statement.
Unfortunately, the program came to a halt in the fall of 2020 after Congress failed to extend it past its Sept. 30 expiration date. Due to the lack of federal funding, along with low consumer demand for air travel between October and December of last year, the aviation industry adjusted staffing levels through “voluntary furloughs and buyouts,” which left many carriers badly positioned to handle the “resurgence” in air travel demand and operational challenges during that period. This could have been avoided had there been no lapse in funding.
Renewed demand was also prompted by the success of the COVID-19 vaccination program.
“As the vaccine rollout began, the demand for passenger air travel returned faster than anticipated,” the committee ranking member noted.
According to Sen. Wicker, this summer “saw many instances in which some airlines were overly ambitious, and passengers paid the price” in the form of flight delays or cancellations. But “those disruptions” do not take away from the success of PSP but rather underscore the program’s necessity, he said.
The floor then turned to Mike Tretheway, one of the world’s leading transportation economists.
Tretheway characterized the U.S.’s overall policy response to the pandemic as the “finest” in the world. According to Tretheway, the U.S. response was “exemplary” in that it met standards in 18 key categories, enabling the country to quickly emerge from the crisis and stand in a position to compete globally.
Tretheway said of particular importance was the “immediate” nature of the response. Unlike other nations, the program did not take months to develop but was created within weeks.
Tretheway also said the response provided “certainty” to the aviation industry and the broader public alike and that it was “fair.” It did not champion one specific airline over another but provided funding to “any and all qualifying airlines.”
Tretheway explained that the policy was designed to support “economic and social conductivity.” In contrast to other nations like Canada, which had no “aviation-specific programs,” the policy was designed to ensure the “continuity of the aviation workforce,” which had taken decades to develop and train.
Tretheway said the program provided funding for the entire aviation supply chain, including air cargo, airports, and aircraft production facilities. This was in contrast to most other nations, which focused on airlines to the exclusion of the rest of the supply chain.
“The U.S. found an appropriate balance between direct support and debt so that the airlines and the whole aviation ecosystem” will come out of this relatively unscathed in the long-term, Tretheway concluded.
Next to testify was CEO of American Airlines, Doug Parker, who relayed his gratefulness for the pandemic assistance extended by Congress.
“I want to say it succinctly and unequivocally, PSP has been an overwhelming success,” he told the committee.
“Thanks to PSP, we have the team in place that we need to run our airlines successfully. In fact, at American Airlines, we have as many or more pilots and flight attendants per scheduled crew block hour this year as we’ve had in years preceding the pandemic,” Parker said.
Referring to the events of Oct. 29 through Nov. 1, which saw over 2,000 flights canceled over the extended weekend, the CEO said: “While various pandemic-related factors have caused our operations to run tight when extraordinary disruptions occur, these events have been the distinct exception, not the rule.”
The floor then turned to Southwest Airlines CEO Gary Kelly, who summed up PSP in two words: “It worked.”
“Our employers have endured unprecedented challenges in the last two years, from new federal requirements to unruly passengers…and PSP secured their jobs, their pay, and their benefits,” Kelly said.
Kelly noted that the company entered the pandemic in a “strong financial position” in 2020.
“As the pandemic unfolded, [Southwest] took aggressive and appropriate self-help measures to remain solvent, eliminating discretionary spending, right-sizing our flight schedule, and cutting executive compensation,” he added.
“The funds received through PSP were only used for qualifying employees’ salaries, wages, and benefits. We did not cut pay rates, we did not cut hours, we did not cut benefits, we did not lay off, and we did not furlough,” the CEO said.
Kelly closed his statement by saying that during the week of Thanksgiving, where the company served over two million customers and operated nearly 24,000 flights, Southwest’s completion rate and DOT on-time performance rate were 99.9% and 88.3%, respectively.
Additionally, according to the TSA, on Nov. 28, 2021’s busiest travel date, Southwest had the highest on-time performance in the industry, Kelly noted.
United Airlines CEO Scott Kirby then took to the floor.
“The PSP allowed us to maintain operational consistency, avoiding the challenges that shutdowns and mass involuntary furloughs would have created,” he said.
“We were among the first airlines and among the first companies to require masks,” he added. “Today, we remain the first and only airline to successfully complete a vaccination requirement for employees.”
After Kirby, Delta Airlines COO John Laughter spoke before the committee.
“In the early days of the pandemic, demand for air travel evaporated by 95%, forcing Delta to take decisive action to preserve jobs without compromising on employee and customer safety,” Laugher began.
Laughter said that to combat the shock in demand, the company parked and retired over 650 aircraft, cut executive compensation, and carried out over 40,000 voluntary unpaid leaves of absences. Delta is now exceeding its operational performance compared to 2019 and has led the industry in on-time performance and completion. The air carrier is in the process of hiring thousands of additional workers to regrow its network and meet demand, he added.
A full video of the hearing can be found on C-SPAN.