Getting More for Phase IV

June 17, 2020
With the aviation industry reeling from pandemic-related air travel disruptions, ARSA is focusing on the next round of relief legislation (“Phase IV” or “CARES 2.0”).

With the aviation industry reeling from pandemic-related air travel disruptions, ARSA is focusing on the next round of relief legislation (“Phase IV” or “CARES 2.0”).

With significant efforts from the association, its members and allies, Congress made considerable resources available to help aviation weather the storm. The CARES Act included loans to airlines, repair stations and ticket agents and “Payroll Support Program” grants for airline contractors. Also, because the vast majority of repair stations are small companies, many can benefit from the Paycheck Protection Program (PPP), which was replenished in late April. (To catch up on the legislative effort to provide economic relief, visit arsa.org/covid19-relief.)

Unfortunately, some maintenance companies have found it difficult to access the resources provided by Congress. ARSA is working to include additional support for the maintenance industry in the next round(s) of coronavirus legislation.

Small Business Size Standards

Companies qualify for PPP loans under the CARES Act by meeting standards set by the Small Business Administration (SBA). The agency establishes small business size standards based on annual revenues and/or the number employees for each North American Industrial Classification System (NAICS) code category.

ARSA is asking Congress to mandate SBA to issue a direct final rule raising the size standard for code 488190 (“Other Support Activities for Air Transportation”) to put repair stations on par with other industries and allow more members to qualify for the PPP.

SBA Affiliation Rules

Combined with the size standards, the SBA’s affiliation rules also make it difficult for some aviation maintenance companies to access PPP relief; in particular, those partially or wholly-owned by private equity companies or operated as a family of small companies under a common ownership umbrella. Recognizing that the affiliation rules would prevent small and medium-size businesses in certain industries from accessing PPP relief, Congress included language in the CARES Act exempting certain franchises, food service and accommodation businesses from the affiliation rules. However, despite being similarly situated and in desperate need of assistance, none of these exemptions apply to the aviation industry.

ARSA is asking Congress to exempt businesses with the NAICS codes most applicable to aviation maintenance from the SBA’s affiliation rules for PPP purposes.

Off-Airport Repair Station Access to Airline Contractor Grants

The CARES Act included a $3 billion “payroll support” grant program for airline contractors. Unfortunately, the qualification language is ambiguous. Treasury issued guidance on April 21 confirming repair station eligibility, but, despite ARSA’s urging, has said nothing about the eligibility of off-airport maintenance subcontractors. ARSA is requesting Congress to define “contractor” as that term is used in 14 CFR part 120 so “off-airport” maintenance providers will have the ability to access grants.

Tax Credits for Investment, Training and Maintenance

Well-crafted tax policy can stimulate economic activity and recovery. After 9/11, the temporary “depreciation bonus” encouraged considerable business investment. ARSA is urging Congress to repeat that success by creating temporary refundable tax credits for capital investment in facilities, worker training and aircraft maintenance.

Topping Up the Buckets

The pandemic’s economic effects will continue well past its health impact, particularly for the aviation sector. Experts from Oliver Wyman CAVOK project that global MRO spend in 2020 will be half of earlier projections. Even as other industries and sectors begin recovery, the maintenance industry will need support to maintain the capacity necessary to service the U.S. fleet. ARSA is therefore requesting that the Phase IV bill replenish the payroll support program and PPP to provide relief to companies that will need continued sustainment.

The Work Continues

In addition to legitimate differences of policy opinion, this is an election year and politics is front and center. Not only is the White House at stake, but Democrats are increasingly optimistic about winning seats they need to take back the Senate (three if Biden wins the election because his vice president would cast the tie-breaking vote and four if Trump wins reelection).

Both sides are playing to their bases. Republicans say Democrats are using the relief debate to channel money to big cities in majority-Democratic states and pursue policy objectives unrelated to the virus response (e.g., the pro-labor strings attached to CARES Act loans and grants). Some conservatives claim that the risks of COVID-19 are overblown and that the response has been “hyped” and “politically hoaxed” to achieve liberal policy ends and “bludgeon” President Trump.”

Democrats are characterizing the Trump administration’s response as incompetent and Senate Majority Leader McConnell as Trump’s enabler, callously out of touch with the needs of working (and, now, unemployed) Americans. Some of it is personal: McConnell is considered one of the most vulnerable GOP senators up for reelection and Senate Democrats — led by Minority Leader Chuck Schumer (D-N.Y.) — have helped his opponent (a female former Marine Corps fighter pilot) raise more than $12 million for her campaign in the first three months of 2020.

Politics aside, there is also the question of how the legislative process will work in the coronavirus era. Doctor Brian Monohan, the House physician, has said it could take “years” for Congress to return to normal with a full roster of staffers working together in an office at one time. While much of the business of developing legislation can be done remotely, lawmakers still need to be in the nation’s capital to vote (as of this writing) and despite what you may believe about Capitol Hill dysfunction, working together in person is still how lawmaking gets done.

Answering the Call

The problems aside, the aviation maintenance industry has access to billions of dollars in CARES Act loans and grants because ARSA, its members and allies engaged aggressively in the legislative process. Given the political challenges, it is going to take more work continue that success.

With more of your help, your company, your industry and your colleagues will survive this period of unprecedented economic disruption. To get involved in ARSA’s legislative program TODAY — or to share thoughts on what industry needs — contact me at [email protected].

Christian A. Klein is the managing member of Obadal, Filler, MacLeod & Klein, P.L.C. overseeing the firm’s policy advocacy practice. He represents trade associations as a registered federal lobbyist and provides strategic communications and legal counsel services to clients. He is executive vice president of the Aeronautical Repair Station Association.