How Far Will U.S. Government Relief Reach to Save the Travel Industry?

The 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 Covid-19 outbreak. 

Airlines Ask for Relief

Airlines 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.

By 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. 

"To 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 immediate action. 

As of 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. 

Even 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 efforts.

"Airlines 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] package."

Hotels Hit Hard

The American Hotel & Lodging Association, supported by the U.S. Travel Association as well as GBTA, has requested $150 billion in 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. 

"Think 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 what." 

On 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.

AHLA 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."

The 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. 

"We 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.

Agency 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 Consideration?

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."