The Coronavirus Aid, Relief and Economic Security Act (CARES) Act, which was passed by the U.S. House of Representatives on Friday, has designated up to $25 billion in financial assistance for passenger air carriers, up to $4 billion for cargo carriers and up to $3 billion for aviation contractors. To be eligible for assistance, air carriers and contractors cannot conduct involuntary furloughs or reduce employee pay rates and benefits until Sep. 30, 2020, or “pay dividends, or make other capital distributions, with respect to the common stock” of the company through Sep. 30, 2021. The bill (PDF) stipulates that the funds may only be used for employee wages, salaries and benefits.
Accepting funds also puts compensation limits on company employees who made more than $425,000 in 2019. Those limits extend for two years and include prohibiting those employees from making more than they did in 2019 for any 12 calendar months or receiving severance pay or other termination benefits in excess of twice the maximum total compensation received in 2019. To guarantee any loans given by the government, “the Secretary [of the Treasury] may receive warrants, options, preferred stock, debt securities, notes, or other financial instruments issued by recipients of financial assistance … which, in the sole determination of the Secretary, provide appropriate compensation to the Federal Government for the provision of the financial assistance.”
The CARES Act was passed by the Senate on Wednesday. It will go into effect once signed by the president.
