CARES Act: Aviation Stimulus

COVID-19
March 26, 2020
 

The economic stimulus bill passed by the Senate on March 25, 2020, addresses needed relief for both commercial air carriers and general aviation segments of the aviation industry. General aviation is a term used to describe all aviation that is not either military flying or the scheduled airlines. That term encompasses what most folks refer to as corporate aircraft and the smaller aircraft that populate airports that aren’t typically served by the airlines.

It appears that general aviation businesses, such as flight schools, maintenance shops, aircraft dealers and brokers, and the like, are not treated any differently than other, non-aviation, small businesses will be. They will receive the same benefits and are subject to the same limitations and restrictions as those other small businesses.

Early in the process of reviewing drafts of the Bill, there was some confusion about the use of the term “Air Carrier” and whether it was meant to cover Part 135 Air Carriers, or just those operating under Part 121. The confusion was resolved in the final Ball, as passed, since the Bill contains a definition that brings Part 135 operators into the fold of Air Carriers. So Part 135 operators will enjoy relief from Federal Excise Tax on jet fuel. The Bill also provides for $100 million dedicated to the Airport Improvement Program for general aviation airports. In addition, FAA has announced a policy decision concerning pilots whose medical certificates expire between March 31 and June 30, 2020. Rather than go through the burdensome and time-consuming efforts to change the regulation, FAA announced that they would simply not violate pilots who continue to fly with medicals that expire in that three-month time frame.

We do know that $25 billion is set aside to go to the passenger carrying, scheduled airlines, $4 billion is earmarked for cargo carrying airlines, and $3 billion goes to contractors serving both types of airlines.

The recipient carriers must enter into assurances with the Treasury that guarantee no pay cuts for workers until September 30, 2020, that none of the federal money will be used to purchase stock of the carrier or other stock listed on a stock exchange through September 30, 2021, that the recipient company will not pay dividends through September 30, 2021 using the federal money, and that service will be retained to those smaller market areas discussed above. Also, recipient companies are required to implement measures to negotiate with certain labor unions going forward.

There are significant restrictions on the compensation of higher paid individuals. One of those restrictions says that from March 24, 2020 through March 24. 2022, the maximum total annual compensation to be paid to an individual is no more than the person was paid in 2019, if that person was paid in excess of $425,000 in 2019, and no other benefits are to be bestowed in excess of those given to the person in 2019.

We’ll be sending out more information as it becomes available, and hopefully, we can clear up some of the present uncertainties.

This Alert was edited on 03.27.2020 at 7:00 p.m. ET.


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