Compass Lexecon Experts Assist Airlines in Historic $25 Billion Payroll Support Agreement with U.S. Treasury Department

On April 14, 2020, the U.S. Treasury Department announced that it had reached agreements with ten U.S. passenger carriers (Alaska Airlines, Allegiant Air, American Airlines, Delta Air Lines, Frontier Airlines, Hawaiian Airlines, JetBlue Airways, United Airlines, SkyWest Airlines, and Southwest Airlines) for their portion of the $25 billion in payroll support allocated to U.S. passenger airlines as part of the Coronavirus Aid, Relief, and Economic Security Act (“CARES”) Act.

Airlines for America retained a team of airline experts from Compass Lexecon—Dr. Eric Amel, Dr. Darin Lee and Dr. Ethan Singer—to quantify the economic benefit of the payroll support to the U.S. Treasury, state treasuries, and the broader U.S. economy. Their report, which was submitted to Secretary Mnuchin in early April, demonstrates that by preventing involuntary furloughs and pay rate reductions at U.S. passenger airlines for the next six months, the CARES Act provides a critical and essential bridge for airlines and their employees so that they are in the position to provide the most efficient, effective, and economical air service to help fuel the U.S. economy’s rebound. By analyzing wage data for nearly 500,000 different airline employees, Compass Lexecon’s analysis calculated that the CARES Act’s payroll support to U.S. airline employees will yield an estimated $18.0 to $27.8 billion in primary benefits to the U.S. economy (including increased state and federal tax revenue, avoided unemployment insurance payments, increased spending flowing directly from the payment of airline employees’ wages, additional supply chain activity, domestic traffic stimulation, and more international visitors). Compass Lexecon’s analysis also demonstrated that because the CARES Act creates the strong incentive and capability for U.S. carriers to restore capacity faster than they otherwise would, it will lead to incremental capacity that will add another $24.9 billion in direct benefits over the next two years, plus an additional $46.2 billion in secondary GDP benefits by enhancing U.S. passenger airlines’ unique ability to accelerate the rebound in the U.S. economy.

Drs. Amel, Lee, and Singer were supported by members of Compass Lexecon’s Boston-based airline team including Virginie Caspard, Amy Feldman, Neha Georgie, Jackie Glasheen, Becca Raffel, Erin Secatore, Pramish Thapa and Ariana Vaisey.