Within the CARES Act, the federal government appropriated funds for commercial carriers and cargo airlines in the form of grants, loans and loan guarantees.

The CARES Act provides more than $100 billion in much-needed assistance to the transportation sector, one of the most distressed industries as a direct result of the COVID-19 pandemic. The aid comes in the form of grants, loans and loan guarantees, with some stipulations.

Aviation

Airlines

Within the CARES Act, the federal government appropriated funds for commercial carriers and cargo airlines in the form of grants, loans and loan guarantees. Specifically, the bill provides $25 billion in grants for passenger airlines for wages and an additional $25 billion in loans. Beyond passenger airlines, the Act provides cargo carriers with $4 billion in loans and loan guarantees and $4 billion in grants, and contractors, such as airline caterers, receive $3 billion in grants. The bill also suspends collection of the 7.5 percent aviation excise tax.

The CARES Act relief comes with the following stipulations:

• Restrictions on buying back stock shares, absent contractual obligations.
• Prohibitions on laying off, furloughing or reducing pay of frontline employees (flight attendants, pilots, gate and airport agents and ramp staff) through September 30, 2020, “to the extent practicable.”
• Loans and loan guarantees cannot be forgiven and may be no longer than five years.
• No increase in compensation for executives.
• Continuation of service to any points served before March 1, 2019.
• Authorization of the federal government, via the Secretary of Transportation, to receive stock options and other financial instruments of the airlines.

Airports

Congress appropriated grants-in-aid of $10 billion to the Federal Aviation Administration in support of airports, payable to sponsors[1], provided they retain 90 percent of employees. The 90 percent rule is not applicable to nonhub/nonprimary airports. The Secretary of Transportation can also waive the 90 percent rule with a proper determination.

The $10 billion was appropriated as follows, with a federal cost share of 100 percent:

• $500 million to increase the previous federal cost share of grants in the Further Consolidated Appropriations Act 2020 (Public Law 116-94) to 100 percent federal cost share.
• $7.4 billion for commercial service airports based on their respective percentage of 2018 enplanements, 2018 debt service and ratio of unrestricted reserves to debt service.
• $2 billion for any purpose for which airport revenues may be lawfully used, apportioned pursuant to specific provisions of 49 U.S.C. Sec. 47114.
• $100 million for general aviation airports for any purpose for which airport revenues may be lawfully used, based on the aggregate published eligible development costs for categories in the National Plan of Integrated Airport Systems.

The CARES Act also includes $100 million for the Transportation Security Administration’s operations and support for cleaning and sanitization of checkpoints and common areas, overtime and travel costs and explosive detection materials.

Of the amounts made available from the FAA Airport and Airway Trust Fund in the Bipartisan Budget Act of 2018 (Public Law 115–123), up to $25 million was authorized to prevent, prepare for and respond to the coronavirus as seen necessary by the FAA.

Rail

Amtrak’s allocation of $1.02 billion in grants includes $492 million support of the popular Northeast Corridor, including the Acela Express line. The remaining $526 million protects Amtrak workers and provides relief to the national network. Additionally, states will not be required to pay Amtrak more than 80 percent for Amtrak facility use pursuant to Section 209 of the Passenger Rail Investment and Improvement Act of 2008 (PRIIA).

Transit Operators

Nearly $25 billion in grants are allocated to state and local transit agencies for operating and capital expenses. This enables agencies nationwide to continue operation of transit services and eliminates statutory requirements that transit agencies use their own funds to receive federal assistance, and maintains key worker protections.

About Duane Morris

Duane Morris has created a COVID-19 Strategy Team to help organizations plan, respond to and address this fast-moving situation. Contact your Duane Morris attorney for more information. Prior Alerts on the topic are available on the team’s webpage.

For More Information

If you have any questions about this Alert, please contact Alan C. Kessler, Michael E. Barnicle, Jamie E. Brown, Matthew A. Freeman, Keith J. Feigenbaum, any of the attorneys in our Transportation, Automotive and Logistics Industry Group, any member of the COVID-19 Strategy Team or the attorney in the firm with whom you are in regular contact.

Notes

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.