U.S. Senate continue to negotiate Monday on what late Sunday night was a $1.8
trillion economic relief package for the U.S. economy. For airlines, hotels,
ground transportation companies and travel agencies awaiting aid, a vote can’t
come soon enough. If the bill passes the Senate, it still will require passage—and
will be subject to changes—by the House of Representatives. Every moment counts
for the travel industry, now hollowed out by international travel bans,
domestic lockdowns and widespread fear gripping consumers in the wake of the
Ask for Relief
for America last week urged the government to provide $58 billion in immediate relief
to airlines in the form of grants and unsecured loans. “The economic
impact on U.S. airlines, their employees, travelers and the shipping public is
staggering. This crisis hit a previously robust, healthy industry at lightning
speed, and we remain concerned that the impacts of this crisis will continue to
worsen,” an A4A statement read. “This is a today problem, not a
tomorrow problem,” added president and CEO Nicholas Cali.
Friday, airlines themselves were applying pressure for Congress to act. In an
open letter to United Airlines workers signed by outgoing CEO Oscar Munoz and
incoming CEO Scott Kirby, the carrier informed employees that layoffs were
imminent without immediate support.
be specific, if Congress doesn’t act on sufficient government support by the
end of March, our company will begin to take the necessary steps to reduce our
payroll in line with the 60% schedule reduction we announced for April. May’s
schedule is likely to be cut even further,” it read. The letter went on to
urge employees to call their legislative representatives and lobby for
Sunday, the proposal on the table in the U.S. Senate matched the $58 billion
request, which is almost four times the $15 billion in relief the government
extended after the 9/11 terrorist attacks gutted the industry. An advisory from
Chicago-headquartered corporate law firm Katten Muchin Rosenman noted the
proposed funding included “significant modifications” of the A4A
request. Specifically, it includes collateralized loans, competitive interest
rates, eligibility requirements, equity participation by the federal government
in the gains of an obligor, executive compensation restrictions, and
continuation of service requirements—all of which were also stipulated in the
relief extended after the 9/11 attacks.
so, Katten expects Congress to garner bipartisan support for the airline relief
funds. GBTA chief operating officer and executive director Scott Solombrino
agreed with that assessment and said the association has signed onto those
can be deemed to be vital to transportation in the U.S. There’s no way the
government can allow the airlines to completely go away or go bankrupt,” Solombrino
said. “The airlines have asked, give or take, for $55 billion. We’ve added
GBTA to that request and are lobbying to make sure it’s part of the [relief]
Hotel & Lodging Association, supported by the U.S. Travel Association as
well as GBTA, has requested $150
government relief. Arguing for its status as a “vital business” to
the U.S. economy, hoteliers are staking their value on their real estate and
the crisis that would ensue if those investments were to go under.
of the tens of thousands of hotels in America and how much real estate that
consumes. If they all default, we’ll have a massive banking crisis on our
hands,” said Solombrino. “We think now the hotels that have offered
some their properties to be part of the medical system because [hospitals] need
extra rooms and beds.” As a result, he added, GBTA thinks hotels can be
deemed critical to the government. Speaking on Thursday, Solombrino predicted
hotels “will get something into the [relief] package, but we’re not sure
Sunday, that remained unclear. Alongside the $58 billion for airlines, the
proposed bill included $150 billion for other large “distressed
businesses,” but did not specify the hotel industry, even as Marriott
International moved to furlough tens of thousands of workers and cut executive
pay. Major meetings and convention brand MGM Resorts in Las Vegas has closed 11
properties, and two Wynn properties followed suit. Other hotel brands large and
small are poised for the same.
CEO Chip Rogers told USA Today on Friday that “33,000 small business
hotels across the country are facing the difficult decision right now to close
their doors and lay off millions of people over the next several days. Not
weeks. Not months. But days.”
U.S. jobless claims surged 70,000 in the week ending March 14,
marking one of the biggest one-week increases ever and putting jobless claims
at the highest level since September 2017.
Where Will Travel Agencies Turn?
GBTA has also joined with American Society of Travel Advisors in
lobbying for economic support for the agency community.
“Agencies are obviously getting wiped out because those markets of
smaller agents that depend on the bookings have gone to zero. All they are
doing now is cancellations,” said Solombrino. “Among the Big Three, one
has mentioned they have negative days, [meaning] more cancellations than
bookings, which no one has ever seen before. Those companies are in great distress.”
ASTA request includes $7.7 billion in direct grants and asks for $50 billion to
be added to Small Business Administration loan funds that will be part of the
total economic relief package.
have endorsed the ASTA package, which includes all the travel agencies that are
part of that whole group, and a lot of them are very small. … The small
agencies will be heavily impacted first,” said Solombrino.
consortium Travel Leaders Group, which counts 4,000 employees and a network of
nearly 50,000 advisors, sees the same trajectory for the intermediary
community. The group estimated its network agency transactions
declined by 60 percent to 90 percent through mid-March and are worsening as
more countries close borders.
CEO J.D. O’Hara on Friday sent his own
relief request to President Trump, the U.S. Treasury Secretary and Senate
leadership. It asked for cash flow grants of $10 billion and no-interest loans
or loan guarantees of at least $20 billion to pay workers, benefits, creditors
and various other assistance.
As of Sunday, it seemed that
legislators may have responded to the pleas. The proposed Small Business
Administration fund had ballooned to $350 billion, increasing from its original
$50 billion to $300 billion by March 19, and adding another $50 billion on
Friday. To date, the largest dispensation ever handled by the SBA was $29
billion after the 2008 financial crash, according to private SBA loan issuer
Fountainhead CEO Chris Hurn. In an effort to widen the net, the current
proposed legislation would also loosen the restrictions on what can be
considered a small business and would increase the limit for 7A loans from $5
million to $10 million.
That’s an important change, said Hurn,
who expects the SBA to reach out to the private sector to manage the volume.
“We are going over 10 times the fund amount and this program will be in
place to the end of the year. It would usually be just for the fiscal year
ending in September,” he said. “As soon as a bill passes, there will
be a tremendous push to put in the rules and regulations because some of these
businesses won’t make it to mid-April.” One of those rules, according to
Solombrino, may be that individual states would need to declare a state of
emergency. “These businesses will be relying on their governors so the
lobbying effort needs to turn there as well,” he said.
For the large TMCs on the other end of the spectrum, there
is talk that the government will give incentives to those who don’t lay people
off, said Solombrino. “They’re going to do kind of a flip of the switch
here: We’ll give you different loan guarantees, which is an incentive [for the mega
TMCs not to lay off 10,000 people. If that’s the case, maybe it’s cheaper to
get the subsidy from the government versus laying them off and then bringing
them back at a later date and trying to get the business running again.”
Can Ground Transportation Get
For the travel industry, Hurn cited
limited-service hotels and small to midsize travel agencies as potentially
eligible businesses for SBA loans. He didn’t cite ground transportation or
chauffeured limousine providers, but those business, too, are hurting as
airport transfers and meetings demand have evaporated. Many of these providers
are small businesses, said Solombrino, who until he took the helm of GBTA last
year was president and CEO of Dav El/Boston Coach and the sat on the National
Limousine Association board of directors.
“The entire vertical is filled
with mom-and-pop shops—very small operators who have basically got to zero and
they are afraid,” Solombrino said. But
even the biggest operators like EmpireCLS have said demand in March has
cratered 95 percent year over year, and the company laid off 95 percent of its
workers last week.
The NLA joined with the American Bus Association, Airport
Ground Transportation Association, United Motorcoach Association, Near Airport
Parking Industry Association and The Transportation Alliance to make a plea for
assistance. GBTA has also thrown its support into the ground transportation
mix. The group is asking for $12 billion in immediate cash grants to fleet
operators and a variety of other measures, including eligibility for
zero-interest SBA loans that can be made within two weeks of application.
Will It Be Enough?
Relief monies working their way from the government to the
market are unlike amounts ever seen before. Huge funds are targeted to the
travel industry, with the seeming realization in the highest levels of the
administration that travel not only drives the U.S. economy but also supports a
host of other businesses that drive the U.S. economy. But some worry about
whether the monies are targeted to the right recipients or, indeed, whether the
current proposals will provide enough to resuscitate the struggling industry.
Referring to the hotel vertical only, Ashford Hospitality
Trust CEO Monty Bennett asked rhetorically, “Is it preferable for a large
business like Marriott to lay off hundreds of thousands of workers so we can
say we helped only small businesses? Is it smart to let an industry icon like
Hilton go bankrupt as long as we help a corner hotel?” Yet legislators are
debating how to provide protections for consumers and workers as much of the
funding, particularly for airlines, is focused on saving the biggest companies.
Solombrino said plenty of people wonder if the travel-oriented funds
embedded in the proposed $1.8 trillion economic package, ultimately, would be
enough. “There are really two camps: There are people who think it’s all
going to fall apart tomorrow, and there are those who think the industry will
pop back up,” said Solombrino. “I tend to fall into the second one. I
want to be optimistic.”
This content was originally published here.