It’s difficult to talk about the impact of Covid-19 without using words like ‘unprecedented’ and ‘devastating impact’. But this is our unfortunate reality at the moment. Because we are still living through Covid-19 it’s hard to fully appreciate what the total impact will be on our lives, the travel industry, and the economy at large. We don’t need to wait for the economic data to tell us the situation is bad. Just looking at the US unemployment data will give a clear signal that tough times are ahead and the time to act is now.
CARES Act — The Coronavirus Aid, Relief, and Economic Security Act
Thankfully, governments around the world have acted to limit the damage and reach of the pandemic. In the United States, the Coronavirus Aid, Relief, and Economic Security Act, known as the CARES Act was signed into US law on March 27 to mitigate some of the economic stress created by the pandemic. It is the largest economic stimulus package ever passed in the US and is the equivalent of 10% of US GDP.
In addition to its size, the speed at which it was negotiated is also a sign of the severity of the times. $2 trillion will be used as direct payments to Americans, Small Business Administration loans, and loans to major industries. For context, the CARES Act is approximately 2.5 times the size of the response to the financial crisis of the last decade and was passed more swiftly after the crisis began.
Reaction from the travel industry to CARES Act
On March 12, Steve Shur, President of the Travel Technology Association wrote to Majority Leader Mitch McConnell, Speaker Nancy Pelosi, Minority Leader Chuck Schumer, and Minority Leader Kevin McCarthy. The main thrust of the letter was to ensure that in addition to airlines that were being covered by CARES, independent travel companies and professionals would also be covered by the relief package.
Shur firstly reminded the lawmakers of the scale of the travel industry and its importance to the US economy.
- 50% of air travel globally is booked through an independent channel (Travel Tech’s members).
- Because airlines have been some of the hardest-hit companies by this outbreak, so too are the travel entities responsible for booking half of all air travel.
- This means Travel Tech’s members and their 31,000+ employees across 35 US states are also feeling the pain right now.
The letter went on to make some proposals to help alleviate the financial stress being felt by the travel sector.
A follow-up proposal was sent on March 18 by the Travel Technology Association, urging lawmakers to consider that “any economic relief package should include travel agents, both online and in the community, ticket agent… technology solutions providers such as global distribution systems, innovative travel platforms for short-term rentals and metasearch, and travel management companies — collectively the ‘travel technology companies’”.
What does the CARES Act mean for agencies?
Thankfully, US lawmakers agreed, and travel technology companies were deemed eligible to participate in the relief programs that form the CARES Act.
The travel companies that are eligible for the CARES Act loans are passenger air carriers, Part-145 certified repair station operators and ticketing agents.
Depending on the size and type of travel company, some of the programs available include:
- Any business with 500 employees or fewer, as well as sole proprietors and independent contractors (ICs) can apply for the Economic Injury Disaster Loan
- The Paycheck Protection Program is designed to subsidize employee wages and encourage employers to rehire laid-off staff.
- For employers with 500 or more employees, they can apply for financial relief through the Emergency Stabilization Fund
But most importantly, the new law created a loan assistance program that is designed to specifically help passenger air carriers, airline repair station operators, and ticketing agents. This new program, which received $25B, will assist a number of our travel agency partners who are too large to qualify for the small business loans, but might otherwise lose out to other industries seeking financial assistance in programs like the Main Street Lending Program.
Travelport is extremely proud to have been heavily involved in the drafting of these proposals and the advocacy efforts that helped us to attain a successful outcome for the industry at large.