United Airlines Uses CARES Act Loophole To Reduce Employee Pay, Keep Bailout Money For Itself - View from the Wing

The CARES Act contained two separate tranches of funds for U.S. commercial airlines: payroll protection funds to ensure employees continue to get paid, and subsidized loans to help airlines avoid bankruptcy.

Major airlines jumped at the payroll grants, which requires that they:

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1. Do not furlough any employees through September 30
   
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2. Do not reduce the rates of pay of employees either

In addition there are restrictions on executive pay, share buybacks, and dividends and airlines must continue to serve the cities they flew to before the panedmic (unless they obtain specific exemptions from the Department of Transportation, which ave been limited).

Airlines get a majority of their payroll covered by grants (even aside from the portion of payroll protection funds being provided in loans) but they weren't going to furlough a majority of employees immediately, especially since the largest airlines have convinced as much as a third of their staff to take temporary leaves. They're pocketing the difference.

That's all consistent with the design of the airline subsidy legislation. However some of the airlines have figured out loopholes that let them keep money that was intended for their employees.

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• First JetBlue figured out that if they required support and salaried employees to take unpaid time off that this was neither a furlough nor a reduction in rate of pay.
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• Now United has realized they can switch employees from full time to part time and pay them less. That's not a furlough, and while it reduces pay it does this through reduced hours not reduced pay rate.

Live and Let's Fly reports on a note to employees on Friday outlining their change.

[E]ffective May 24, 2020, and in full compliance with the provisions of the CBA and the CARES Act, all full-time employees covered by the Passenger Service Employees Agreement and the Fleet Service Employees Agreement will be reduced to part-time status.

While our contract allows for a reduction of full-time employees all the way to 20 hours, we will commit to an equivalent number of 30 hour bid lines. We are making similar changes for our management personnel and those changes will be announced Monday.

The International Association of Machinists is threatening to sue. My sense though is that the airline bailout language, pushed so hard and so quickly by industry lobbyists with the public pleading of unions wasn't well enough drafted - although from the perspective of those advocating the language this was a feature, not a bug.

Clearly the intention of the grants was that the money would go to employees, whose pay would not be reduced. And clearly United, like JetBlue, is reducing the amount they're paying employees and using the savings to bolster the position of their shareholders. The airline's argument is that they need the money which is the same argument they deployed trying to deny refunds to customers for flights they cancelled.

One is theft from taxpayers, the other theft from customers. And employees don't get what was promised. Instead all three groups get Kirby'ed while outgoing CEO Oscar Munoz, who claimed to make employees his priority, silently exits stage left.

For those of you who favored the bailout when will you ever learn?