Airline contractors received CARES Act funding, but still cut jobs

The CARES Act funding approved by Congress for the aviation industry was meant to preserve jobs, but didn’t prevent some layoffs and furloughs by airline contractors, an investigation found.

While lawmakers consider another round of federal pandemic aid, they are asking the companies awarded money to stop cutting workers.

Atlanta-based DAL Global Services, which does contract work for Delta Air Lines and other carriers, is one of 15 companies that got federal stimulus funding but still furloughed or laid off workers, according to a U.S. House subcommittee investigation of the Payroll Support Program (PSP) for the aviation industry.

DAL Global Services qualified for $162.7 million in CARES Act funding to pay employees, according to the U.S. Treasury Department’s website.

U.S. Rep. James Clyburn, the South Carolina Democrat who chairs the subcommittee, wrote letters to that company and six other aviation contractors that received the most funding to ask them to halt further layoffs while using the federal stimulus money.

The move comes as airlines push for another round of federal stimulus funding. The subcommittee is in favor of that funding, but called for an amendment to prohibit layoffs by aviation contractors until their funds are completely spent.

The House subcommittee’s staff report said the Treasury department “delayed execution of PSP agreements for months and permitted layoffs while the agreements were pending.”

That “had the perverse effect of incentivizing companies to lay off or furlough workers before executing the agreement,” the report said. Airline caterer Gate Gourmet, which has operations at the Atlanta airport, laid off thousands of employees nationally before it executed its agreement in June and later recalled 900 workers, according to the report.

Aviation contractors have seen cutbacks in work from airlines since the pandemic began, prompting a sharp decline in air travel.

Delta Air Lines is looking to handle in-house work normally done by contractors, including wheelchair handling, aircraft servicing, cargo handling and plane fueling. That’s because Atlanta-based Delta has a surplus of staff for its scaled-back operation amid the pandemic and is looking for ways to avoid layoffs of its own employees.

Among the layoffs reported to Georgia by airline contractors are 39 workers let go in March by DAL Global Services, and hundreds of employees cut in April and May by ABM Aviation and Delta Sky Club contractor SodexoMAGIC. Separately, Hartsfield-Jackson concessionaire HMSHost disclosed 570 job cuts effective Oct. 16.

DAL Global Services is a former subsidiary of Delta Air Lines. It merged with Argenbright Holdings I LLC in 2018 and is being renamed Unifi.

In a letter dated Oct. 9, Clyburn wrote that DAL Global Services received funding to cover about six months of payroll. But, because the agreement for the funding wasn’t struck until July, four months after the CARES Act was passed by Congress, the company only committed to pause layoffs for “just over two months.” The CARES Act prohibited companies accepting funds from laying off workers until Sept. 30.

“Since the purpose of the Program is to preserve jobs, I ask that you honor Congress’s intent and commit to forgo any layoffs or furloughs until all of the PSP funds awarded to you have been exhausted,” Clyburn wrote to company president Adam Taylor.

According to Clyburn’s letter, some companies cut staff before they got the funding, meaning they “will have PSP funds to spend on a reduced workforce well into 2021,” since payroll support funds were calculated based on pre-pandemic staffing and can be used only for wages, salaries and benefits.

DAL Global Services declined to comment.

According to the subcommittee’s report, “Congress appropriated billions of dollars to keep aviation workers employed at least through September 30, 2020. Unfortunately, Treasury’s poor implementation of the Payroll Support Program meant that thousands of workers lost their jobs well before that date – even though their former employers received taxpayer assistance to cover the cost of their paychecks.”

The Treasury Department said it focused first on the largest employers to help stabilize the industry and support as many jobs as possible, and that the program has supported hundreds of thousands of aviation industry jobs. It provided more than 80% of funds requested within 26 days of the enactment of the CARES Act, according to a Treasury spokesperson.

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