A lobbying group representing U.S. airlines on Wednesday said federally mandated minimum service requirements are "unsustainable" for carriers as the Covid-19 pandemic sends passenger numbers to the lowest levels since the 1950s.
One of the requirements to receive portions of $25 billion in federal payroll grants and loans under the coronavirus rescue package is that airlines have to keep a certain number of flights, which varies by carrier and is based on networks before the disease spread widely.
The Department of Transportation has issued some waivers but Nicholas Calio, president and CEO Airlines for America, which represents Delta, American, United, Southwest, JetBlue, Alaska and Hawaiian, said in prepared testimony ahead of a Senate hearing that "the cost associated with operating nearly empty flights to communities with little to no demand significantly exacerbates air carrier liquidity."
Airlines are among the industries hardest hit by the coronavirus and the shelter-in-place orders. They have parked about half of their planes and cut thousands of flights to try to save money, but are already posting their first quarterly losses in years. The industry group estimates U.S. airlines are burning about $10 billion of cash a month.
Airlines aren't currently planning to seek additional federal aid to weather the coronavirus, Calio told lawmakers.
Even with the reduced schedule, airlines are averaging about 17 passengers per domestic flight, A4A said.
"We would ask both this Committee and the Administration to seek solutions to address the challenges posed by this unsustainable requirement," Calio said in the prepared testimony ahead of a hearing at the Senate Committee on Commerce, Science and Transportation. "Make no mistake, as the duration of this pandemic lingers, the reasonability and practicality of this requirement significantly diminishes. Carriers and communities alike are going to have to come together and acknowledge the footprint and frequency of service in 2019 cannot convey to the 2020 COVID-19 pandemic reality."
U.S. air travel demand dropped 96% in April to the lowest levels since before the jet age, according to A4A.
Some lawmakers criticized the passenger airlines for how they've operated since Congress approved the coronavirus aid in March.
Sen. Richard Blumenthal, D-Conn., said constituents have complained that airlines are providing vouchers, not cash refunds, when they cancel flights. The Department of Transportation last month warned airlines that they are obligated to give cash refunds when the carrier is the one canceling the flight. Airlines can still provide travel credits if a passenger doesn't want to fly but the airline is still operating the flight.
"In effect, you are -- forgive me -- screwing the very taxpayers whose money is going into your pockets" through the $50 billion in federal aid set aside for passenger airlines in the CARES Act, Blumenthal said.
Calio said that refunds are outpacing bookings and that requiring cash refunds for everyone would very quickly push airlines toward bankruptcy.
Another issue that arose was a reduction in airline employee schedules. Airlines that accept a portion of the $25 billion in federal grants and aids for payroll are prohibited from cutting their pay rates and or laying their workers off through Sept. 30. Some lawmakers argue the reduced schedules, and therefore smaller paychecks, violate the intent of the aid.
Sen. Charles Schumer, D-N.Y., Sen. Maria Cantwell, D-Wash., and Sen. Sherrod Brown, D-Ohio, are also seeking Treasury Department intervention to stop airlines from cutting those schedules, Cantwell said.