We talk a lot about the plight of airline employees, but most are only now starting to see the full impact of the pandemic now that payroll support funding has expired. Airline contractors, on the other hand, have felt the full impact almost from the very start. Despite receiving payroll support form U.S. taxpayers, airline contractors abused the program and engaged in mass layoffs.
Airline Contractors Abused Payroll Support
A new report from the House Select Subcommittee on the Coronavirus Crisis notes:
“Contrary to congressional intent, Treasury permitted aviation contractors to lay off thousands of workers and receive full payroll support calculated based on the companies’ pre-pandemic workforce.”
The report asserts the Treasury Department botched the rollout of the Payroll Support Program (PSP) for airline contractors, with delays leading to unnecessary job losses. It also asserts that airline contractors strategically engaged in mass layoffs just ahead of agreeing to accept PSP funding.
“Aviation contractors reported conducting 57,833 layoffs and furloughs prior to applying for PSP assistance—more than 17 times the number reported by passenger air carriers.”
Another 16,655 layoffs occurred between when PSP became available and when the companies submitted their applications (some as late as July). Many who were not laid off had their hours reduced.
Let’s take a look at the numbers.
Of the 16,655 layoffs, 7,160 were from Gate Gourmet. Overall, Gate Gourmet reduced hours or laid off 85% of its workforce. Yet it still received $171 in payroll support from U.S. taxpayers, a calculation based upon Gate Gourmet’s pre-pandemic workforce. What happened next? As the report notes:
“After receiving the PSP funds, unlike other contractors, Gate Gourmet brought back some of its workers. It recalled approximately 900 workers and gave additional hours to approximately 1,200 part-time workers. Thousands of employees remained out of work, but on July 15, 2020, Gate Gourmet decided to return management to full salaries— retroactively.”
Swissport laid off or furloughed 3,873, never reduced executive compensation, and “did not recall a single worker based on its receipt of PSP funds.” $170 million to be exact. Swissport claims it will use the money for “future” payroll expenses.
Flying Food Fare laid off more than 90% of its 5,737 workers, received $85 million in payroll support, and did not hire a single worker back.
Only LSG Sky Chefs, a catering company owned by Lufthansa, managed to protect most of its staff in exchange for PSP. It received $214 million and only shed 349 jobs (with plans to bring back those displaced staff members).
Folks, we see crony capitalism on full display here. The airline beggars are bad enough, but at least they largely stuck by their promise not to furlough any workers until funding expired. Airline contractors, on the other hand, took money, still laid off workers, and rewarded executives. That’s particularly sad because these employees often work just as hard if not harder than airline employees for a fraction of the wages.