Biden Takes Office, Congress Swears In, What’s Next for the Aviation Industry?
With President Biden and members of the 117th Congress officially sworn into office, the airline and aviation industry has a clearer sense of the legislative and regulatory risks and opportunities ahead. While 2020 was a turbulent year for the industry, 2021 presents an opportunity to refocus and rebuild. The federal government has already begun rolling out additional pandemic relief proposals, which include funding for airlines and aviation. We expect additional oversight from the relevant congressional committees of jurisdiction.
Sustainability efforts are likely to be front and center and included in the majority of legislation under the Democratic-controlled congress. Currently, the Biden Administration is working with Congress to implement a multi-phase legislative strategy including a rescue bill currently moving through Congress that includes airline relief. We expect President Biden to announce additional infrastructure proposals in the coming months. Federal highway funding authorization expires this fall which will provide another opportunity for infrastructure and modernization investments.
As President Biden continues to name staff and congressional committee assignments are announced, we can begin to see who will be critical to the aviation industry over the next two years. Some key regulators/legislators who will have oversight of the aviation industry include:
- Secretary of Transportation Pete Buttigieg
- FAA Administrator Steve Dickinson
- Secretary of Homeland Security Alejandro Mayorkas
- Special Presidential Envoy for Climate John Kerry
- Senate Commerce Committee Chairwoman Maria Cantwell (D-WA)
- House Transportation and Infrastructure Chairman Peter DeFazio (D-OR-04)
- Senate Commerce Committee Ranking Member Roger Wicker (R-MS)
- House Transportation and Infrastructure Ranking Member Sam Graves (R-MO-06)
Below we list a few key areas that we expect to see action on. This includes COVID-19, environmental regulations, passenger rights, and tax policies.
As the Biden administration looks to ramp up both testing and vaccination processes, the reopening of borders and a rebound in travel (weighted towards leisure) seems likely in the second half of 2021. The industry as a whole, however, still has room to improve as they have yet to implement standardized testing or vaccination protocols for passengers or employees even as TSA checkpoint travel numbers are slowly rising. Some actions recently taken by the new Biden Administration include:
- Mandatory requirements for travelers to wear masks in airports and on airplanes and enforcing quarantines for people who arrive in the U.S., as done in one of President Biden’s first Executive Orders. While there may now be federal support for such rules, the job of educating passengers and enforcing these rules still falls to the airlines themselves; and
- Not lifting any travel bans as they currently stand – including blocking President Trump’s rescinding of travel bans on passengers from most of Europe and Brazil.
All eyes will be on the aviation industry as travel looks to reopen. A digital health passport that captures testing and vaccination information, expected to rollout by IATA in early 2021, is likely to help push this effort forward. They are still in the process of signing up global carriers, however not all companies are waiting for the deployment of IATA’s digital health passport. United, as an example, recently developed and launched its own digital health passport. This not only allows its passengers to get the latest information on Covid-19 travel restrictions, but it also enables travelers to upload their COVID-19 test results and vaccination information before their departure.
Overall, we think that achieving company standards will require full C-suite buy in and participation and large-scale education and communication efforts across geographies. We think that this will be one of the key drivers for the recovery in air travel, especially internationally.
President Biden has made it clear that sustainability policies will be a key cornerstone of his administration, naming former Secretary of State John Kerry as Special Presidential Envoy for climate and tasking him with coordinating cross-agency climate efforts. As the Secretary of Transportation, Pete Buttigieg will also play a major role here working closely with FAA administrator Steve Dickson, whose term runs until 2024. Some key actions we expect include:
- Requiring publicly traded companies to disclose sustainability information and greenhouse gas emissions (GHGs) in quarterly filings;
- Finalizing EPA standards with ICAO recommendations for curbing emissions;
- Alignment with the European Union’s goal for “zero-emission large aircraft” to be on the market by 2035; and,
- The Democratic majority in congress will push climate legislation that may include specific requirements for airlines.
While some airlines have enhanced their Environmental, Social, and Corporate Governance efforts in the past few years – for those that have not established a program, it is going to become more and more of a hindrance to growth as institutional investors, lawmakers, and passengers alike have a closer eye on sustainability efforts than ever before. We are also noticing that travelers, Generation Z and Millennials in particular, are beginning to care more and more about ESG and what companies are doing to help the environment and community when making travel plans.
The Democratic majority in Congress may stir back up and bring a viable vote for the Airline Passengers’ Bill of Rights. While various proposals have been included in past iterations, some key areas have already been implemented. This includes compensation for involuntary denied boarding (recently increased), requiring airlines to refund tickets and compensate passengers for delays and cancellations caused by the airlines, and barring certain fees. Other areas where we might see more oversight would be further scrutiny over the airlines and ensuring that there is meaningful competition. We may very well see COVID-19 testing and vaccination protocols that could also invoke the issue of sharing personal health data with government regulators or airlines themselves. There is also a movement to give passengers more legal strength against the airlines by repealing the exemption of airlines from state consumer protection laws. Additionally, there would be other areas such as flight delays that the airlines would be required to provide travelers compensation for.
Some key things to keep in mind:
- The Airline Passengers’ Bill of Rights has been introduced in the past but never gained the support to receive a full floor vote. Senate Majority Leader Schumer may provide that opportunity; and
- Senators Klobuchar (D-MN) and Murkowski (R-AK) have been pushing the Protecting Personal Health Data Act, which would require regulations for healthcare technology by federal agencies and could impact COVID-19 tracking capabilities.
We expect the Democratic congressional majority to make itself known in the early months of the Biden administration, working to pass a number of bills that were stymied by Mitch McConnell over the past six years. Representative Peter DeFazio (D-OR-04), who chairs the House Transportation and Infrastructure Committee, and Senator Maria Cantwell (D-WA), who chairs the Senate Commerce Committee, will be integral to this effort.
President Biden has already pledged an array of infrastructure investments. With a Democratic majority and a reconciliation bill early in the year, we are likely to see larger investments than past years. A primary source of funding would come from the FAA Airport Improvement Program (AIP) and Passenger Facility Charge (PFC) taxes. President Biden’s infrastructure plan as a candidate promised to double funding for the AIP, and in a primary debate he expressed support for legislation that would increase federal limits on increasing the PFC. Here’s what we have seen:
- House Aviation Subcommittee Chairman DeFazio (D-OR-04) has been critical of airline fees in the past, claiming that airlines’ increases in bag fees run contradictory to the sectors’ argument that an increase to the PFC would drive demand down.
- Democrats on the House Committee on Transportation & Infrastructure released an outline that included an increase to the PFC cap (and indexing it to inflation) and the creation of an Airport and Airway investment Program focused on modernization projects and to accelerate completion of the FAA’s airspace modernization program (NextGen).
It is probable we will see a vote to raise the cap on the PFC in the 117th Congress. Combined with the potential for a hike in corporate tax rates on an industry already in a challenged financial position, the airline industry faces many financial challenges in 2021. It will be imperative to communicate to the investor community and strengthen relationships with financial institutions to mitigate the financial impact of these policies. The PFC debate has also drawn public attention in the past, so communicating the industry position to the general public will also be important. Lastly, with such large workforces spread across the country and world, communicating to employees will require a multi-tiered communications system and a strong core message and strategy.
We expect the Biden Administration and Democrat-controlled congress to take a much more “hands-on” approach to regulating industry, engaging with a broader group of third-parties than the last administration. Our Public Affairs team is already seeing the start of this trend. Identifying, educating, and mobilizing stakeholders to support the airline industry, both internal and external, will be critical to ensuring the industry is represented in these conversations.
As companies in the airlines and aviation space gear up for the next four years, taking proactive steps to protect the industry’s freedom to operate will be imperative. 2021 represents a year of opportunity for the industry, and understanding the legislative and regulatory landscape ahead is key to successfully navigating and succeeding under the parameters of the new administration.