Bailout Double Cross: We Gave Airlines Money Not To Reduce Worker Pay, They’re Doing It Anyway

The CARES Act included $58 billion for passenger and cargo airlines, plus another $3 billion for airline contractors (and $17 billion on the table for Boeing).

Out of that $58 billion, half is for payroll support. The Department of Treasury offered the payroll support 70% in direct grants, and 30% in low interest loans. In exchange the government takes 3% of the bailout value in stock warrants, the right to buy the airline’s stock later at current prices.

Taking these funds airlines agree to,

  • No involuntary furloughs or reductions in pay rates through September 30
  • No share buybacks or dividends until September 30, 2021
  • Limits on executive pay until March 24, 2022
  • Continue service to existing cities, with certain exemptions

Airlines have worked to convince employees to take voluntary leave (both paid and unpaid). And they’re going to schedule employees for minimum hours. Both of these measures save money.

Since the airlines weren’t going to lay off everyone without bailouts, they likely come out ahead paying employees out of grant funds and not imposing furloughs through the end of September.

United has said that once the requirement to keep everyone on payroll through September lifts, they expect to keep fewer people on payroll. That’s both the reality of lower travel demand and positioning for the next bailout.

One Mile at a Time reports that JetBlue has come up with a way to take bail out funds and still pay workers less. in other words, a double cross to keep the cash for themselves.

All support and salaried JetBlue employees are being “required to take 24 days of unpaid time off (UTO) between April 20 and September 30, 2020.”

  • This isn’t a furlough
  • It isn’t reducing an employee’s rate of pay

It’s reducing the amount paid to employees by reducing their time worked. And JetBlue believes this is a legal workaround,

Through this UTO initiative, we are reducing work schedules across the company, which is in line with guidance outlined by the CARES Act.

Now Ben Schlappig “recognize[s] airlines are in a bind here” because of challenges they’re facing in their business.” I disagree. The whole point of the money being granted to airlines was so that their employees would keep earning as much as they earning before. Without that stipulation, the bailout would not likely have passed (at least in the form that it did).

Ben writes, “This isn’t an act of greed, or anything, but rather is JetBlue management trying to fight for survival.” To be clear it’s taking money appropriated by Congress for the airline’s employees, for the survival of shareholders’ equity. Surely this was too clever by half?

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

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. As a small business owner I can only imagine what the Govt. would say if I tried this after receiving our PPP grant. Which I have. Not to mention my employees who would now be thinking…”So, you are asking me to lose 24 days of pay under a hidden furlough making it not enough time for me to file unemployment?”

    Basically they are milking the Govt bailout, they are milking their employees and leaving them with no alternative, and they are milking the American taxpayer who funded this. WOW.

    They will all end up doing this – and while I will never defend the senior employees at airlines making their absurd wages – this can be disastrous for lower wage employees who live paycheck to paycheck. It’s criminal.

  2. Gary, you misunderstand. This is just JetBlue’s strategy to drive the public perception of the airline down to the levels of American and United.

  3. You demonize AA and UA all the time, but JetBlue is the true demon of US airlines. A totally over-rated operations. Won’t miss them when the go out of business.

  4. Wow! Watching JetBlue’s brand destruction and product degrading as its corporate culture in the post-Barger era morphs into the same toxic & destructive greed, greed, greed, more greed & nothing but greed as seen at “McBoeing” or Doug Parker’s American Airlines is truly sad to watch.

    Alas, with JetBlue’s Board hijacked by the same types of greedyAF modern day robber barons that are running McBoeing and American Airlines into the ground as well as they have already, it’s hardly surprising to see yet another example of the flagrant display of sleaze, dishonesty and lack of humanity that is now the hallmark of this formerly passenger beloved airline.

    I mean, all one needs to know about how sleazy and greedy this airline has become is to look back to last fall when despite lacking cash to pay for the $1 billion stock buyback authorization that took effect on Oct 1st, it borrowed $1 billion instead (btw, that $1 billion loan has interest and bankers’ fees that also have to be paid); then announced significant increases in fees AND introduction of sham airfares otherwise known as “Basic Economy” (to cover the cost of that $1 billion loan and…wait for it…); spent $175 million on the first tranche of its “accelerated stock buyback” before the end of November (HELLO! that’s why its flyers had to be screwed with higher fees and that rip-off, sham “Basic Economy” fare, which largely preys on the least informed consumers as it works the fees are not taxed angle/loophole oh so well – proving so well that that fee increase/product degradation nastiness last fall was little more than a “stock buyback tax”! 😉 ).

    So, if that alone doesn’t speak to a level of extreme greed, then what will?

    I mean, seriously, borrowing $1 billion and then slapping flyers with fees and other product degradations just before using borrowed money to undertake a stock buyback – if that doesn’t smack of greed and profligate spending on something it could NOT otherwise afford, then what will?

    Anyhow, it’s been a while since I last reviewed the state of unionization at Jetblue, but for sure this latest shameful greed grab provides all the wrong optics that plays right into the hands of any union hardliners.

    As it should.

  5. And stuff like this is what’s wrong with our political/legal system.

    Most have no issues with criminals getting a fair trial and ensuring evidence isn’t compromise, etc. What people can’t stand is when attorneys/companies look for a loophole that clearly was not intended and then take advantage of it. I’d call it the common sense rule. Most of us know the story of parent telling kid “Be home by 10pm” and then the kid comes home by 10pm and then goes out again. We know the intent is to get home and stay home. Same as with many laws and rules, the intent is clear but someone made a typo or overlooked something (since no one is perfect) and now lawyers take advantage of it.

    People like that should be banished from society 🙂

  6. Does anyone really believe that companies should keep paying employees to do nothing? This was a bailout for airline employee unions, not airlines. Companies will shockingly continue to act in their own best interest, just like you and I do. It was a dumb bailout, as was the bailout to the Kennedy center and other congressional Dem payoffs. The better idea was potus’s initial proposal to temporarily eliminate all payroll taxes. No favoritism, but still allows companies to rightsize while retaining more employees. Dems blocked it, I guess because orange man bad?

  7. @WR2. I am n example of a company that is using it the right way. Our employees are being paid their full salaries. No one has or will be furloughed unless this drags on until August – thanks to PPP. Further, I am not using the PPP loophole that allows us to reduce salaries by 25% so to designate that for rent, utilities, etc.

    I don’t agree with all the terms laid out and I think it could have been much better. But I will not milk my employees or the taxpayer for something beyond the intent. Save our employees and have us ready for reopening.

    So no, not “ALL” companies are using it to their advantage. I am digging deep into my own personal funds to save my business while, at the same time, using PPP to save my employees.

  8. @WR2 – your payroll tax “idea” has been long dismissed by anyone with half a brain – it is regressive and doesn’t do anything to help the working class. Not even the temporary occupant of the White House talks about it, that should tell you something.

    It’s ineffective just like the leaders you praise allowing the likes of Shake Shack and Ruth’s Chris to take “small business” loans. Because details.

  9. I am very unimpressed by JetBlue Management’s performance during this crisis. They’ve engaged in refund shenanigans, tried to take CARES act funds but not maintain the service requirements and now engage in a pay cut without calling it a pay cut. So much for a being a more customer oriented and team member friendly carrier! I hope they get their comeuppance soon.

  10. @Stuart,
    You nailed it: the difference is the word “intent”. This is unfortunately something that is lost in our legal system of contracts and sticking to the “wording of the contract”.

    We should be focusing more on the intent rather than wording (and the unintended loop holes any wording might bring about). But this requires people to be honourable; something that is very unfortunately becoming more scarce by the day.

  11. Unions have bankrupted airlines every 10 years with their excessive wages and benefits for flight attendants who are rated very poorly in terms of service. Every time airlines get on firm financial footing unions are right there extorting unfair and excessive wage and benefit increases.

    The world has changed. Union contracts are null and void and it would be irresponsible, criminal and a violation of fiduciary duty for management not to heavily reduce wages. Don’t blame the Big 3 for asking for government help when pretty much every airline in the world is doing so. The help was to tide the airlines over until travel can resume but that does not mean demand is going to jump back up for air travel and that does not mean wages are going to remain the same. Right now there are hundreds of thousands of flight attendants who are not working. Their wages should be in line with supply and demand of labor.

    The only betrayal and double cross would be if management maintains excessively high union wages which will mean an insolvent airline in short course. The airline assistance is there to provide short term assistance. If this was a bailout please don’t give me one. Individuals and small businesses don’t have to pay back the stimulus or PPP so why not hound them for not preparing for an unprecedented economic shutdown and ask them to pay it back.

  12. @WR2

    The payroll tax elimination would do nothing to help employees and everything for companies to layoff as many employees as possible. In the end, there would 75% unemployment, and companies would be shells of their former selves. Do you have any idea how bad it would be? Like 50% decrease in GDP. Dumb, dumb idea!

  13. @Jackson Waterson – You tell ’em! Those ungrateful union bastards are always whining about things like making a living wage, not going bankrupt from medical costs, and not being able to buy luxuries like median housing in their area.

  14. @Jackson,

    Yep, because wasting TENS OF BILLIONS on stock buybacks and then going hat in hand for corporate welfare/corporate socialism when times get tough is such a great economic system.

    [CUE BIGLY EYE-ROLLS…]

    Or a company that BORROWS $1 billion to fund a stock buyback it otherwise can’t afford (while also sticking it to its customers with more fees, higher fees & even worse service/more cramped cabins) – that then also seeks to screw the employees that live paycheck to paycheck is so DESERVING of being free of unionization.

    Don’t get me wrong! I’m NOT saying every company necessarily should be unionized.

    But a company like JetBlue which has made clear that the only stakeholder that matters are its shareholders, but neither its customers nor the employees from which the profits are derived MOST CERTAINLY is all but begging to be unionized.

    Just sayin’

  15. I’m not sure JetBlue’s interpretation of the loan rules is going to fly (bada bing), but your supposed outrage is seriously misplaced. In the real world, it’s pretty obvious that airline employees were given too good a deal from the CARES Act. It’s completely absurd that they get several months of basically full pay when millions of other folks who lost their jobs in this crisis get far, far less. So it’s not like they’re getting “screwed” or anything. Meanwhile, JetBlue isn’t trying to be “cute” with the loan rules because they want to pay out dividends to their shareholders or bonuses to their executives. Rather, they’re trying to conserve cash to survive. It’s no secret that they do not have the financial resources of the larger airlines. JetBlue’s survival is obviously most important to their employees, and the company may need some financial breathing room next fall as it awaits a rebound in traffic. So conserving cash through a leave program may be a win-win for both the airline AND its employees. And probably a win, too, for customers like me and (I presume) you who would like to see the airline survive.

  16. @chopsticks- I agree with your point that the CARES Act payroll support was overly generous. However, that’s the law- Jetblue received $936M in payroll grants, which was supposed to be the “amount equal to the compensation paid by the applicant to its employees for the period from April 1, 2019 through September 30, 2019”. They shouldn’t be able to take ~ $200M out of that to pay for their other bills. If they need additional financial breathing room, then borrow more money in loans.

    You know, and I know that come October 1 2020, a large number of those employees are on the chopping block. So it’s disingenuous to claim that JetBlue’s survival is in the best interest of all the employees. Besides, they are a valuable company with $11B in assets, landing rights, etc. If they run out of money to repay their loans, the debtholders will take over and sell the assets to another company- it’s not like the airlines will disappear.

    But the current shareholders would share in the pain. Maybe that’s your primary concern?

  17. @chopsticks,

    A company that can’t afford a stock buyback that yet still goes balls to the wall, borrowing $1 billion after authorizing its next share buyback program for the approximately the same amount – all while screwing its customers by further degrading its product while implementing even more (and even higher) fees; adopting the deceptive and fraudulent fares that are Basic Economy (which mostly preys on the least sophisticated consumers all while conveniently dodging/evading Federal
    excise taxes) is NOT a company that can be trusted – much less deserving of being afforded the benefit of the doubt that its intentions are noble or sincere, or anything more than the naked, abject greed that their actions in the post-Dave Barger era speaks to.

  18. @George — I have no financial stake in JetBlue: if they went under, my entire loss would be under 100,000 loyalty miles — not a big deal to me. (Of course,
    it might mean my next flight could cost a few bucks more.)

    I also don’t have an opinion whether JetBlue is legally permitted to impose a mandatory leave program. I’m just questioning the idea that this is some terrible “double cross” that desires public humiliation. There’s no good and evil here. Just a lot of pain, and good reasons for everyone to focus on survival.

  19. Everyone forgot Delta was the first airline to implement this slight of hand. Delta reduced hours by 25% for all ground and administrative staff starting March 30. Delta has gone to great lengths to say it is a ‘reduction in scheduled hours,’ not a pay rate reduction. Those efforts have gone so far as executives correcting employees for ‘mis-speaking’ when employees have called them pay cuts during company townhall events.

    Particularly for line management and administrative staff, I feel it is disingenuous. How do you reduce full-time, exempt employee hours when notionally they have no set schedule or required min/max number of hours (putting aside the FTE 2080 concept). I suggest you can’t – it amounts to a pay cut.

  20. These people that comment about FA’s being over paid, obviously are not FA’s and don’t know anyone that is.
    We are not paid for our time on the ground. We get paid wheels up to wheels down or door close to door open. Rolling delays, mechanicals……..not being paid.
    So while you all are boarding and de-planning and we are setting up for snacks and beverages and safety procedures, we are not being paid. There are many FA’s who can’t afford a place to live on their own. Most live pay check to pay check. How many of you would work 8 hours to only be paid for 4.5?
    Shame on management for taking advantage and even asking FA’s to take extra time off without pay. We already GIVE so much extra time to the airline. How about CEO’s & management only get paid for half the time they work from now on. How about management work for free until this is over. We are on the front line. We are the ones at high risk being exposed to hundreds of people a day, but WE should go without?
    Sure some senior FA’s make a higher wage – but they have put in many hours to get to that pay rate. They have paid their dues and they still aren’t paid for their time on the ground. Delays, mechanicals, medicals, tail swaps, return to gates, weather……..
    We do what we do because we love seeing passengers being able to see their families. To go on that vacation. To see that sick friend or loved one. To see the excitement of the first time flyer.
    Be mad at the airlines that are taking advantage of the bailout, but please do not place the FA’s into that category of greed!

  21. No involuntary furloughs or reductions in pay rates through September 30 yet being salaried they are cutting my pay by cutting my hours even thought I am not paid hourly but salaried DOES CONGRESS CARE?

  22. I find it very fraudulent to take money that was provided by the CARES ACT and resort to cutting hours to “workaround” the rules provided by the act. As an airline worker, I can tell you unless you do the job don’t tell me how unimportant a union is. The only thing that pisses me of is the union goes more to bat for its full time workers and not enough for the part time all while everyone pays the same dues. Most part timers had schedules pre covid 30 hrs a week, after the money was received all had to drop to 20 hrs. Then when the full timers were about to get downgraded in hours the union filed an injunction. What’s the difference each directive was done after the CARES ACT and is in violation but the full time staff is the only one being protected.

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