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Airline Contractors Axed Thousands of Workers While Federal Payroll Aid Was On Way

October 13, 2020

By Steve Wishnia

The airline industry has taken hundreds of millions of dollars in taxpayer money – and still fired thousands of U.S. workers.

WASHINGTON—Fifteen airline contractors that received more than $1 billion in federal aid intended to “preserve aviation jobs” laid off more than 16,000 workers while their applications for the money were pending, according to a report released Oct. 9 by the House Select Subcommittee on the Coronavirus Crisis.

The companies, which provide services such as handling baggage, cleaning planes, and preparing meals, were all seeking part of the $3 billion earmarked by the federal Payroll Support Program to help airline contractors keep workers on their payrolls during the pandemic. The PSP program, created by the Coronavirus Aid, Relief, and Emergency Security (CARES) Act enacted in late March, required that the aid be used exclusively for wages and benefits, and that recipients “refrain from conducting involuntary furloughs or reducing pay rates and benefits until September 30, 2020.” 

But the Treasury Department, which administered the program, allowed applicants to dump workers until the date an agreement was formally signed, which in some cases took more than three months. 

“Treasury’s delays in disbursing PSP funds resulted in more than 16,500 layoffs and furloughs at 15 companies—more than 15% of the aviation contractor workforce,” the House report said.

Airline contractors had already laid off more than 57,000 workers before the CARES Act was passed—more than one-third of their average 2019 workforce—it added, but the Treasury Department “knew companies were conducting layoffs while their PSP applications were pending, but failed to object or require that employees be rehired.” 

Gate Gourmet, approved for $171 million on June 19, laid off more than 5,000 workers—half its average number of employees in 2019—during the 78 days its application was pending, according to the report. Flying Food Fare, awarded $85 million on June 15, cut more than 1,500, more than a quarter of its 2019 workforce. Sky Chefs, whose $214 million in aid was more than any other contractor received, laid off and/or furloughed 349 workers during the almost four months it was waiting.

The CARES Act, a Treasury Department spokesperson responded, “requires Treasury to provide payroll support to eligible applicants. It does not require that former employees be rehired.”

The department, they told LaborPress, had “focused first on the largest employers to help stabilize an industry in crisis” and disbursed more than 80% of the funds requested by companies in the airline industry as a whole within 26 days.

The House subcommittee obtained a June email from another contractor, Swissport USA, in which a company cargo executive warned subordinates that because its PSP agreement was imminent, it was “urgently” important to “furlough or terminate” staff to avoid “unnecessary costs once the ink is on the paper.”

Swissport USA, the American branch of a Swiss corporation, received $170 million in federal aid, two-thirds a direct grant and one-third a low-interest loan. It furloughed more than 4,300 workers before it applied for the aid on April 3. Between then and the time it signed the agreement July 10, it terminated almost 2,500, the report said—and it has not used the aid to rehire any of them.

Swissport did not respond to requests for comment from LaborPress.

Eulen America, a subsidiary of a Spain-based contractor, laid off 280 of its 300 employees at New York’s John F. Kennedy Airport, more than 350 at Miami Airport, and 90 at Fort Lauderdale Airport in Florida, according to the 32BJ SEIU union, which has been organizing those workers. It was awarded $25.8 million in PSP aid, and signed the agreement May 29. While its application was pending, it axed at least 100 more workers, the report estimated.

“This report underlines what we have been hearing from Eulen workers since the beginning of the pandemic: Even in the middle of a massive global health and economic crisis, Eulen continued to put their own financial interests over the rights and dignity of its workers,” 32BJ vice president Rob Hill, the union’s director of organizing, said in a statement. “This is, quite simply, a gross misuse of taxpayer money and a blatant disregard toward hundreds of workers who are trying to stay afloat.”

“Eulen America was forced to reduce its workforce due to an immediate and dramatic loss of revenue,” the company said in a statement to LaborPress. “While our application was pending, it was impossible for us to know what, if any, funding might have been received. We received funds on June 4, 2020 and have since initiated a rehiring process. We are optimistic about the return of travel and looking forward to reinstating our workforce as soon as possible.”

According to 32BJ, Eulen has rehired only 30 workers at JFK and 33 in Miami. Gate Gourmet told the subcommittee that it recalled about 900 laid-off workers after it received the aid, but it expects to cut staff after the PSP program’s prohibition on layoffs expires Sept. 30.  

The one exception to that pattern, the report said, was G2 Secure Staff, which furloughed almost 2,200 workers in March. It banned furloughs once the CARES Act was passed, two company executives told the subcommittee in August, saying it knew the money was coming and wanted “to abide by the spirit” of the law. When it got the funds in June, it gave workers lump-sum payments to compensate for their reduced hours over the previous two months, they added. 

The report recommends that Congress pass a new round of payroll support to preserve aviation jobs as part of a broader response to the coronavirus pandemic; amend the CARES Act to prohibit layoffs by aviation contractors until all PSP funds are expended; and ensure that the Treasury Department expedites the distribution of any additional payroll support funding.

Subcommittee chair James Clyburn (D-S.C.) also sent letters Oct. 9 to seven contractors, including Swissport, Flying Food Fare, Sky Chefs, and Gate Gourmet, giving them until Oct. 16 to “commit to forgo any layoffs or furloughs” until their PSP aid runs out next year.

“I think we are in danger of not being able to pay rent,” Nigel Hylton, a passenger service representative at JFK laid off by Eulen in mid-March, said in a statement released by 32BJ. “If they received that [stimulus] money and know that workers have families to take care of, they should be honest and fair to the workers who’ve dedicated themselves over days, weeks, months, and make sure we receive that money.”

October 13, 2020

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