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'Brazen Abuse of Taxpayer Dollars': Katie Porter Accuses Airlines of Using Covid-19 Bailout Funds to Fight Consumer Protections

"Airlines took taxpayer-funded bailout money, then turned around and started lobbying to weaken consumer protections. Is this really their top priority during a pandemic?"

Rep. Katie Porter (D-Calif.) speaks during a House Financial Services Committee hearing titled "Monetary Policy and the State of the Economy," in Rayburn Building on Wednesday, February 27, 2019. (Photo: Tom Williams/CQ Roll Call)

Rep. Katie Porter is accusing major U.S. airline companies of violating the law by spending Covid-19 bailout funds on a lobbying campaign aimed at weakening passenger protections and rolling back oversight of the air travel industry.

In a letter to Treasury Secretary Steve Mnuchin and Department of Transportation (DOT) Secretary Elaine Chao on Monday, the California Democrat called the airlines' lobbying effort a "brazen abuse of taxpayer dollars" and demanded penalties for any companies involved.

"Now is not the time to reduce oversight of the airline industry. The airlines have time and time again flouted the limited consumer protections that the DOT currently enforces."
—Rep. Katie Porter

"Spending on an anti-consumer political campaign is an abuse of Coronavirus Aid, Relief, and Economic (CARES) Act funding," wrote Porter, referring to the March law that established a $25 billion bailout program specifically for the airline industry.

"Given that the Department of Treasury is tasked with monitoring the airlines' use of taxpayer aid, I ask that you sanction the airlines involved in this lobbying effort," Porter wrote. "I also request that the DOT end the rulemaking process that it began at the behest of the airline industry."

DOT's proposed rule change would narrow the department's definition of "unfair and deceptive practices," a move critics say (pdf) would empower the airline industry to violate consumer protections with impunity. Airlines for America, a trade group representing industry giants like Delta and JetBlue, has lobbied DOT in support of the change.

"Now is not the time to reduce oversight of the airline industry," said Porter, a member of the Subcommittee on Consumer Protection and Financial Institutions. "The airlines have time and time again flouted the limited consumer protections that the DOT currently enforces. As you attested, Secretary Chao, the DOT received an 'unprecedented volume of complaints' in March and April: 25,000, a startling number particularly when compared to the typical monthly average of 1,500."

Porter also called out United Airlines, Delta, and JetBlue for slashing employees' hours even after receiving billions in taxpayer bailout money.

Porter's letter came as lawmakers are urging the airline industry to implement more stringent protections for passangers to prevent the spread of Covid-19. Last week, the Trump administration issued non-binding guidance encouraging—but not requiring—airlines to limit the number of passengers on a single flight and require face masks for everyone on board.

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Read the full letter:

Dear Secretary Mnuchin and Secretary Chao:

I write in response to disturbing reports indicating that the major airlines, having benefited from the largest taxpayer-funded bailout in history, are now lobbying the Department of Transportation to weaken existing passenger protections in the airline industry. Spending on an anti-consumer political campaign is an abuse of Coronavirus Aid, Relief, and Economic (CARES) Act funding. Given that the Department of Treasury is tasked with monitoring the airlines' use of taxpayer aid, I ask that you sanction the airlines involved in this lobbying effort. I also request that the DOT end the rulemaking process that it began at the behest of the airline industry, as the proposed rule (Docket Number DOT-OST-2019-0182) would weaken enforcement of airline passenger protections.

In March, Congress passed the CARES Act—the largest stimulus package in history. As you know, it was a bipartisan effort and signed into law by President Trump. CARES created a $25 billion airline-specific grant program called the Payroll Support Program (PSP). To qualify for a grant under the PSP, an airline must commit to exclusively using the funds to pay airline employee wages, salaries, and benefits. The four largest carriers in the country—American Airlines Group Inc. (American), Delta Airlines Inc. (Delta), United Airlines Holdings Inc. (United), and Southwest Airlines Co. (Southwest)—received the lion's share of PSP funding: $19.2 billion.

The amount that Congress allocated to the PSP is significantly lower than the $58 billion that the airlines requested. At the time of the CARES Act's passage, the airlines justified their exorbitant appeal by referencing their rapidly declining profit margins. To be sure, passenger traffic is down 94 percent compared to last year.

Given the unquestionably bleak financial outlook for the airline industry, I was stunned by news that these airlines are spending their limited—and taxpayer-subsidized—cash flow to petition the DOT to categorically weaken consumer protection standards by adopting the Federal Trade Commission (FTC)'s unfairness approach. According to FTC Commissioner Chopra, after the FTC adopted its current unfairness standard in 1980, "the number of enforcement actions and rulemakings plummeted, leaving a vacuum that hobbled development of the law." The DOT appears to agree, as in documents describing the proposed rule, it acknowledged that the proposal "could translated into the department performing fewer enforcement and rule-making actions" against airlines and could "lengthen the time needed to complete the actions."

Now is not the time to reduce oversight of the airline industry. The airlines have time and time again flouted the limited consumer protections that the DOT currently enforces. As you attested, Secretary Chao, the DOT received an "unprecedented volume of complaints" in March and April: 25,000, a startling number particularly when compared to the typical monthly average of 1,500. Twice in as many months, the DOT issued warnings to airlines participating in the PSP that have refused to comply with the DOT's Enforcement Notice issued on April 3, 2020. In that Notice, the DOT clearly articulated that the airlines "have an obligation to provide a refund to a ticketed passenger when the carrier cancels or significantly changes the passenger's flight." Yet still, airlines continue to deny passengers—many of them my constituents—the refunds they are owed.

In addition to disregarding the DOT's Enforcement Notice, the airlines have also blatantly violated the explicit terms of the PSP. I joined my colleague Congresswoman Jan Schakowsky in writing to you, Secretary Mnuchin, on May 26 to ask that you sanction the airlines that have recently cut their employees' hours, pay, and benefits. United, Delta, and JetBlue Airways have all unilaterally cut workers' hours, in some cases significantly decreasing these employees' pay and benefits. The airlines have defended the cuts by drawing a dishonest distinction between hours and "compensation," as the latter must be preserved per the terms of the CARES Act.

Given their brazen abuse of taxpayer dollars and repeated violations of agency-imposed consumer protection rules and statutory obligations alike, I ask that the Department of the Treasury direct the airlines to immediately cease their lobbying efforts aimed at watering down passenger protection standards. Additionally, I request that the Department of Transportation end the rulemaking process associated with the Proposed Rule "Defining Unfair or Deceptive Practices" (Docket Number DOT-OST-2019-0182.) I hope to receive your response no later than July 15.

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