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23 April 2020

CARES Act Summary – Transportation

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Akin Gump Strauss Hauer & Feld LLP

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Akin is a law firm focused on providing extraordinary client service, a rewarding environment for our diverse workforce and exceptional legal representation irrespective of ability to pay. The deep transactional, litigation, regulatory and policy experience we bring to client engagements helps us craft innovative, effective solutions and strategies.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act includes funding and financing for airlines and aviation businesses as well as grants for airports, public transit and Amtrak.
United States COVID-19
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Transportation Provisions

The Coronavirus Aid, Relief, and Economic Security (CARES) Act includes funding and financing for airlines and aviation businesses as well as grants for airports, public transit and Amtrak. The bill does not provide funding for broader stimulus purposes as was done in the 2009 American Recovery and Reinvestment Act (ARRA). Congress may very well reauthorize the surface transportation program in subsequent legislation. In fact, leaders of the House and Senate transportation and appropriations committees have voiced support for authorizing and funding surface transportation programs, which otherwise expire on September 30, 2020. While the outlook for an infrastructure bill before the COVID-19 pandemic was uncertain because of the difficulty of identifying a revenue stream, the economic impacts of COVID-19 could argue in favor of a significant general fund investment in transportation infrastructure. Subsequent legislation also could provide broad stimulus funding across other infrastructure sectors.

1. Economic Stimulus Provisions for Aviation Sector and Other Impacted Businesses

The bill authorizes the Secretary of Treasury to make $25 billion in loans and loan guarantees for passenger airlines, repair stations and ticket agents and $4 billion to cargo airlines. The bill also provides $32 billion in grants to pay wages, salaries and benefits of employees with $25 billion available for passenger airlines, $4 billion for cargo airlines and $3 billion for airline contractors. Grants are based on the wages, salaries and benefits that employees received from April 1 to September 30, 2019. The Senate bill did not include grants for airlines to pay wages and retain its workforce, and grants were included as part of the negotiation with Democratic leaders of the House and Senate. The bill similarly authorizes loans and loan guarantees for other businesses impacted by the Coronavirus with similar conditions as the airlines.

The loans and loan guarantees and grants come with conditions to protect the federal government’s investment and workers. The Secretary of Treasury is authorized to receive warrants, stock options and other financial instruments as a condition of the financial assistance. Loans and loan guarantees may be no longer than five years. Airlines and other beneficiaries of loans and grants are restricted from engaging in stock buybacks unless contractually obligated or pay dividends. Borrowers must maintain their employment levels as of March 24, 2020, “to the extent practicable,” until the end of September and are prohibited from cutting employment levels by more than 10 percent from what they were on that date, and loans cannot be forgiven. A recipient also must agree to certain restrictions on compensation of employees making more than $425,000 in total compensation. Air carriers receiving grants must agree that before September 30, 2020, they will not conduct furloughs, reduce pay rates, buy back stock or pay dividends. The carriers are also required to continue service to any point served before March 1 to the extent practicable. The bill also suspends the collection of certain aviation excise taxes, which will make ticket prices more attractive to consumers.

2. Supplemental Appropriations

The Act includes $48.5 billion in supplemental appropriations for transportation programs to address COVID-19 impacts to the transportation sector.

The CARES Act includes the following more targeted funding for transportation:

  • $10 billion for Federal Aviation Administration Airport Improvement Program (AIP) grants to maintain airport operations in light of the significant drop in revenues at airports. Of the amount, at least $100 million is for general aviation airports. The funding will be distributed by formula. Hub airports that receive funding must continue to employ at least 90 percent of the people employed as of the day of the bill’s enactment until the end of the year.
  • $56 million for the Essential Air Service Program to maintain existing air service to rural communities.
  • Language clarifying that states can issue special permits for overweight vehicles and loads to carry emergency supplies for the duration of the fiscal year assuming the President’s emergency declaration is still in effect.
  • $25 billion for Federal Transit Administration (FTA) grants transit grantees for operating and capital expenses. Funding will be distributed using existing FTA formulas.
  • $1.018 billion for Amtrak operating assistance to cover revenue losses related to coronavirus. In addition, funding will be provided for states to pay their contribution for state supported routes.
  • Over $5 million for the Department of Transportation (DOT) to cover increased administrative expenses as a result of the coronavirus.
  • $5 million for the DOT Inspector General to provide oversight over funds and guard against fraud, waste and abuse.
Take Note
This document is not intended to create an attorney-client relationship. You should not act or rely on any information in this document without first seeking legal advice. This material is intended for general information purposes only and does not constitute legal advice. If you have any specific questions on any legal matter, you should consult a professional legal services provider.
ARTICLE
23 April 2020

CARES Act Summary – Transportation

United States COVID-19

Contributor

Akin is a law firm focused on providing extraordinary client service, a rewarding environment for our diverse workforce and exceptional legal representation irrespective of ability to pay. The deep transactional, litigation, regulatory and policy experience we bring to client engagements helps us craft innovative, effective solutions and strategies.

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