Democrats want Mnuchin to explain why bailed-out airlines are cutting workers' hours

Key Points
  • House Democrats want Treasury Secretary Steven Mnuchin to explain why airlines are getting away with cutting workers' hours after they received coronavirus relief funds aimed at maintaining payroll.
  • The lawmakers also want Mnuchin to explain whether he told the airlines they could cut the hours. 
  • Airlines including Delta, JetBlue and United accepted government aid as part of the $2.2 trillion CARES Act, on the condition they don't lay off or cut worker pay rates through Sept. 30.
A United Airlines flight crew walks through the terminal at San Francisco International Airport on April 12, 2020 in San Francisco, California.
Justin Sullivan | Getty Images

House Democrats want Treasury Secretary Steven Mnuchin to explain why airlines are getting away with cutting workers' hours after they received portions of $25 billion in government coronavirus relief funds aimed at maintaining worker payroll.

The lawmakers also want Mnuchin to explain whether he told the airlines they were permitted to cut the hours. 

Airlines including DeltaJetBlue and United have announced or already cut the schedules of their hourly workers to reduce costs after air travel demand fell to the lowest in decades. That's despite having accepted government aid as part of the $2.2 trillion CARES Act on the condition they won't lay off or cut worker pay rates through Sept. 30.

"United, Delta, and JetBlue airlines have all unilaterally cut workers hours — in some cases significantly decreasing these employees' pay and benefits," Reps. Jan Schakowsky and Jesus Garcia of Illinois and Katie Porter of California wrote in a letter to Treasury obtained by CNBC that they delivered Tuesday. 

"The creative position held by these airlines is that an hours cut is somehow unrelated to compensation, which is protected under the CARES Act. The hour cuts imposed by these carriers have made some workers eligible for unemployment assistance — a circumstance the legislation was explicitly designed to prevent. These carriers are very clearly out of compliance with the letter and spirit of the law."

The House lawmakers in their letter pushed Mnuchin to release guidelines clarifying that reducing hours would be in violation of the CARES Act. They also want to know whether he or other members of the department had any prior communication with airline carriers about whether it would be acceptable for them to cut worker hours. 

"Please disclose whether you or any other Treasury officials provided carriers with guidance that cutting worker hours would be allowable under the terms of the CARES Act," they wrote.

"If so, which carriers did you and your team consult with and what guidance did you provide?"

The letter follows a similar letter from Sens. Charles Schumer, D-N.Y., Maria Cantwell, D-Wash., and Sherrod Brown, D-Ohio to Mnuchin earlier this month. And last week, 13 Senate Democrats wrote to the CEOs of Delta and JetBlue, saying: "When it comes down to what's in an employee's paycheck, reducing hours and cutting pay have the same effect: less money for workers to take care of themselves and their families."

New York-based JetBlue said it complies with the terms of the federal aid.

"In full compliance with the CARES Act requirements, we put in place a variety of programs with an emphasis on voluntary time off and unpaid leave programs," it said in a statement. "Given that our flights in many cities are completely suspended and are significantly reduced in others, there are quite literally no hours for our crewmembers to work in many cases."

Delta said its "work schedule reductions, which comply with the CARES Act, ultimately protect jobs."

Delta has reduced nonflight attendant and pilot work schedules, such as ground workers, by 25%. Those reduced schedules are set to continue for several months.

"As I mentioned during our virtual town hall last week, given the substantially reduced current demand for our product, the schedule reduction for ground-based hourly and merit employees will need to be extended through September," Delta CEO Ed Bastian said in a staff note Thursday, which was seen by CNBC. "This is consistent with the reduced flying schedule and hours for our flight crews."

Airlines have urged employees to take voluntary partially paid or unpaid leaves to help the airline reduce costs. 

United said that under the CARES Act any employee furloughs are voluntary.

"We are taking proactive, cost-cutting measures to offset an unprecedented drop in travel demand and to help us achieve our overall goal to preserve as much financial flexibility now so we can not only survive this crisis, but thrive once it is behind us," United said in a statement.

The Chicago-based carrier earlier this month backed away from some mandatory schedule changes after an outcry and lawsuit from the union that represents its fleet and customer service workers.

Democrats, with the urging of unions, pushed to give airlines financial support in hopes of supporting an industry that employs close to 750,000. Providing federal grants to protect workers was a particularly politically thorny issue. Lawmakers were criticized for granting airlines similar relief after the Sept. 11. 2001, attacks, only to leave some workers holding the bag.

Some of the airlines that took that government funds in the wake of the attacks, including United Airlines, ultimately filed for bankruptcy. As part of United Airlines bankruptcy, it terminated four pension plans, which were then underfunded by more than $10 billion.

Meantime, in the past five years, the country's largest U.S. carriers — Delta, American, Southwest and United — have collectively spent roughly $39 billion buying back their stock, according to a tally from S&P Dow Jones Indices.

"The financial outlook is dire for the airline industry, which is why Congress supported U.S. commercial aviation in recent relief packages," the lawmakers wrote Tuesday.

"However, our intent has always been to protect airline workers (as the title of this section of the CARES Act makes clear), not corporate salaries or shareholders. The need for protections like these has been made clear over the past several years as the commercial aviation industry spent record profits on stock buybacks, which overwhelmingly benefit institutional investors and individuals with stock options."

The lawmakers also took aim at Mnuchin for not helping 350 workers at Miami Air, a charter air company that filed for bankruptcy in March and later announced plans to liquidate. 

"Company executives were directly in touch with the Treasury to secure payroll assistance, to no avail," they wrote.