The Regional Airline Association (RAA) released a statement on long-time member ExpressJet’s announcement yesterday of its potential phased wind-down by the end of the year. ExpressJet provided safe, professional air service to communities of all sizes as a United Express carrier and, with the loss of this contract with its major airline customer, will now evaluate alternative business strategies for 2021 and beyond in an attempt to preserve its business, flying, and workforce.
The COVID-19 pandemic has brought deep and lasting harm to airlines of all sizes when demand for air travel plunged drastically in March and has remained depressed. Today, major airlines are scrambling to predictively align system capacity with a future demand that has yet to fully reveal itself. Yesterday’s announcement reflects the double-edged sword regional airlines encounter as they navigate the pandemic: direct harm to their companies is further complicated by downstream harm related to COVID-19’s impact on their major airline partners.
While the economy is part of this story, it would be a mistake to dismiss ExpressJet’s scenario as simply economics. For months, RAA warned that smaller airlines lack access to the full suite of financial assistance envisioned by the CARES Act, which benefits larger carriers more than smaller regional airlines. Additionally, RAA has urged Congress to extend the CARES Act PSP program, a lifeline that has helped carriers cover a portion of their payroll costs, saving hundreds of thousands of jobs. This assistance expires September 30, but announcements like this show demand is not anticipated to return by that time and smaller carriers like ExpressJet remain uniquely vulnerable to service decisions beyond their control. Extending PSP supports will delay furloughs, ultimately mitigating the number of total furloughs needed by allowing more time for demand to return. Unfortunately, a Congressional impasse suggests this additional relief may not come.
For ExpressJet, it may already be too late. ExpressJet was one of several regional airlines required to pay back 30% of the CARES Act Payroll Support Program (PSP) funds. In this way, ExpressJet was treated like a major airline because of the size of its workforce, although it is not one. Furthermore, ExpressJet, which applied for a CARES Act loan in advance of the April 7 “early consideration” deadline, has been in a holding pattern with the US Treasury for more than three months. ExpressJet is not alone in these hurdles. To date, only one independent regional airline has been able to access Cares Act loans; by contrast, every major airline has reached loan terms.
Congress did not intend to leave smaller carriers behind. However, Treasury has declined to exercise the flexibility granted under the CARES Act to work with smaller carriers, instead imposing strict collateral and loan to value requirements that most regional airlines, with limited unencumbered assets, struggle to meet. The Department points to its obligation to the taxpayer in view of strict collateral requirements. However, the looming retraction of regional air service across the country carries far greater harm to taxpayers – particularly in small and rural communities. Regional airlines like ExpressJet provide the only source of scheduled, commercial air service to 66% of the nation’s airports. The economic footprint of this regional-only air service was over $134 billion last year -- with a conservatively estimated $36 billion in local wages and tax revenues.
RAA’s President Faye Malarkey Black stated: “ExpressJet is not the canary in the coal mine; without intervention, this will be the fourth regional airline to fail. When an airline shutters, it’s like a negative force multiplier. The airlines’ direct employees are dealt a crushing blow which continues to reverberate as small communities lose air service and those communities in turn lose business and even more job losses follow.”
Black concluded: “Lawmakers must set aside partisan differences and extend the crucial Payroll Support Program (PSP) without delay. Congress should act to ensure Treasury – once and for all – allows regional airlines unobstructed access to the Air Carrier Loan program as Congress intended. In the name of protecting the taxpayer, another airline is facing an unplanned wind-down, 3000 jobs hang in the balance, and communities face substantial loss of air service once the CARES Act service requirements expire. Congress must act decisively to stop more airline failures.”
