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‘Shutdown of travel’ seen as White House, Congress plan rescues

Airports warn of defaults on bonds, automakers suspend operations

Airport groups want $10 billion in immediate assistance. Above, McCarran International Airport in Las Vegas last year.
Airport groups want $10 billion in immediate assistance. Above, McCarran International Airport in Las Vegas last year. (Bill Clark/CQ Roll Call file photo)

Wednesday brought a new wave of rattling announcements from all corners of the transportation sector as airports warned of defaults on bonds, automakers suspended operations, and the administration and Congress readied another round of stimulus spending.

“We’re witnessing the shutdown of travel,” said U.S. Travel Association CEO Roger Dow.

Honda, Ford and General Motors all announced that they were suspending operations. Fiat-Chrysler said it would start closing plants “progressively from today through the end of March.”

The closures came just one day after an employee at Ford’s Dearborn plant tested positive for COVID-19. Hyundai, meanwhile, announced it was suspending operations at an Alabama plant after an employee there tested positive as well.

[Road trip: Sen. Sherrod Brown skips air travel amid coronavirus]

And they come well after Congress has begun to move toward helping other modes of transportation navigate the impact of the pandemic.

A memo from the Treasury Department leaked to news outlets Wednesday showed that the department planned to spend some $50 billion in loan relief for airlines, with that money being used for both passenger and cargo airlines.

According to the memo, Treasury would determine the appropriate interest rate and other terms and conditions, and the loans would come with the condition that increases in executive compensation be limited until the loans were repaid.

Treasury Secretary Steven Mnuchin insisted last week that any aid to airlines would come through loans, though Airlines for America, an industry group, has also asked for immediate aid in the form of grants.

The Treasury memo also included $150 billion in loans and loan guarantees for other impacted industries — a number that matched a request by the U.S. Travel Association to help secure its industry in the wake of the pandemic.

Millions of jobs

The association on Wednesday predicted most of the damage from the pandemic would come in the next two months, with $202 billion in direct travel spending and 4.6 million jobs disappearing before May. Earlier projections had forecast losses of $355 billion and 4.6 million travel-related jobs this year.

President Donald Trump in a news conference said the administration hasn’t “detailed” yet where the money will go, “but certainly, hotel industry, the cruise ship industry, the airlines, those are all prime candidates, absolutely.”

Airlines, however, he said, “would be number one if you look at what’s going on.”

“They go from having the best year they’ve ever had to having no passengers because of what we had to do in order to win this war,” he said.

Lawmakers seemed open to helping airlines — but conditionally.

Sen. Josh Hawley, R-Mo., said he was prepared to back loans to airlines but would object to “a straight bailout.”

“If it’s just giving money, then that’s something I’d have a lot of concern about,” he said, saying what he’s heard so far is “no bailout, but asking for loans secured with collateral.”

On Tuesday, four Democratic senators — Ed Markey, D-Mass., Richard Blumenthal, D-Conn., Sheldon Whitehouse, D-R.I., and Tammy Baldwin, D-Wis. — sent a letter to Senate leadership urging any support for the airline industry include consumer and worker protections.

“The prevalence of anti-consumer conduct in aviation is on the rise, as demonstrated by price-gouging, involuntarily denied boarding, shrinking seats, baggage mishandling and more,” they wrote. “We cannot permit the airline industry to obtain federal assistance to weather the coronavirus and then return to these predatory business practices after the crisis.”

Airlines and airports, meanwhile, continued to reel from the pandemic.

Big declines

Delta Airlines said it expected March revenue to decline by almost $2 billion compared to last year, and announced it would reduce capacity by 70 percent, with 80 percent of its international operations reducing over the next two to three months. The company is parking at least half of its fleet — more than 600 aircraft — and reducing the salaries of Delta corporate officers by 50 percent through May, with directors and managing directors taking a 25 percent pay cut.

Delta’s CEO, Ed Bastian, and the board of directors said they would cut their own salaries by 100 percent for the next six months.

And the Airport Council International-North America and the American Association of Airport Executives wrote a letter to congressional leadership urging them to include $10 billion in immediate assistance to help through the crisis.

The groups wrote that they will have amassed $100 billion in debt during the crisis, with $7 billion in bond principal and interest due through the end of this calendar year.

“No U.S. commercial service airport has ever defaulted on a bond payment,” leaders of the two groups wrote. “Allowing a default now would be devastating for any affected airport and the entire industry, as future borrowing costs would increase significantly.”

Amtrak and trucking

A separate supplemental appropriations request by the administration included $500 million for Amtrak, which has also seen sweeping ridership reductions.

An Amtrak spokeswoman said the company estimates it will need about $1 billion through the remainder of the year to make up for the ridership and revenue loss, with daily ridership down more than 60 percent, future bookings down 80 percent from last year and cancellations up more than 400 percent.

The American Trucking Associations, meanwhile, asked for regulatory relief during the crisis in order to enable the industry to continue transporting goods such as food, water, medicine and fuel. Among its requests were to keep rest stops open during the emergency, provide alternatives for truckers who need to renew or obtain their license as states shut DMV facilities, and easing restrictions that might bar truckers from delivering goods during the emergency.

The U.S. Department of Transportation’s Federal Motor Carrier Safety Administration expanded its national emergency declaration to provide hours-of-service regulatory relief to commercial vehicle drivers transporting emergency supplies in response to the pandemic. The declaration provides for easing restrictions on how long a driver is permitted to drive.

Autos

That the auto industry would feel the impact seemed almost inevitable.

Ford announced Wednesday it was shutting down production in its U.S., Canadian and Mexican manufacturing facilities after Thursday night’s shifts through March 30 to clean and sanitize the plants.

The company said it was working closely with the UAW to figure out how to reopen and additional protocols for moving forward. Among the considerations it was taking: maximizing social distancing among plant workers during work hours and at shift change, when large numbers of people typically gather at entry and exit points.

Honda and GM made similar announcements. GM said it will be suspending production until at least March 30, and reevaluating on a week-to-week basis after that. Honda announced it would suspend production at all of its automobile production plants in North America due to an anticipated decline in market demand related to the pandemic. The suspension will begin March 23 and last through March 31.

“During this time, Honda will continue full pay for all of its associates,” the company said. Some 27,600 Honda workers in North America will be affected.

Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research, said the virus has hurt the U.S. industry in part because of supply chain disruptions from China and Europe. Some of that impact, she said, is yet to be seen.

Add “demand falling off a cliff and public health concerns and nervousness of the workforce of being in close proximity, and it’s a recipe for this to happen,” she said of the shutdowns.

Noting that Honda cited lower consumer demand for its suspension of production, she said: “You can’t keep building cars and putting them in a field somewhere.”

Jennifer Shutt contributed to this report.

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