A change in administration, even in “good” times, is always a time of great uncertainty and shifting priorities. An even greater challenge awaits the incoming administration as it faces unprecedented global uncertainty and crisis, where simply surviving is the primary name of the game for the aviation industry.
Just prior to the pandemic hitting, the aviation sector was enjoying its golden era – with soaring profits and record TSA passenger through-put numbers. Now, the latest IATA survey of airline CFOs and Heads of Cargo regarding airline business confidence reports continuing “deteriorating losses” as of October 2020 and a “pessimistic” profitability outlook over the next year for the industry at large.
While there are promising signs of an imminent vaccine, many outstanding questions remain regarding whether the vaccine will gain widespread public buy-in as well as the timing of global dissemination, and whether these steps alone would meaningfully signal a return to “normal” times. And what that means for restoring confidence among the traveling public remains to be seen. Below are a variety of issues that will face the next administration along with our predictions for how a Biden administration may approach each of them. Despite the ranging topics, the priority will most certainly relate to addressing the current public health and economic crisis as it relates to the aviation sector.
Prioritization of Economic Stimulus and COVID-Related Industry Impacts
The devastating effect of the pandemic on airline front-line workers and their families has put significant pressure on the government to come to its aid. Given the expiration of the CARES Act at the end of October and the stalemate on HEROES Act legislation, which would have provided a second round of aid to the sector, we expect a Biden administration to be strongly in favor of prioritizing some form of economic stimulus for the aviation sector. However, the amount and type of aid will ultimately depend heavily on bipartisan efforts on the Hill to pass a bill.
Stricter Regulations Surrounding Passenger Safety
The Trump White House has been openly opposed to any federally-mandated face mask requirements, finding them to be unnecessary restrictions of liberty and leaving the airlines to enact and enforce their own policies. While the Democrats on the House Transportation and Infrastructure Committee introduced legislation that would have provided greater safeguards, they have not made any headway in the legislative process on these initiatives, including legislation that would require face masks for passengers and legislation that would clarify that the Federal Aviation Administration (FAA) has the authority to impose any health and safety requirements to reduce the spread of such infectious disease through the aviation system during public health emergencies like COVID-19. We expect the new Biden administration to take a tougher stance on health and safety, including masks, and to work toward establishing and harmonizing industry-wide standards and procedures to allow for travel to safely reopen.
Renewed Regulation, Oversight, and Enforcement on Consumer Protection
Under the Obama administration, the federal government maintained a keen focus on airline passenger rights and protection, which translated into millions of dollars in civil penalties for violations of aviation consumer protection and disability rules, significantly more funding for investigation and enforcement efforts, including regular industry audits, and many regulations passed that placed a steep cost of compliance on the industry.
In stark contrast, during the last four years of the Trump administration, the focus has been on scaling back burdensome requirements on the industry, leading to decreased enforcement efforts. One significant effort has been a rulemaking process to define the phrase “unfair or deceptive practice” found in the U.S. Department of Transportation’s (DOT) aviation consumer protection statute (“UDP rule”). A Final Rule was just issued that codifies current long-standing practices and aligns DOT’s standard with that of the Federal Trade Commission’s Section 5 authority in order to provide greater certainty to stakeholders, including rights to be heard and present evidence before the resolution of any potential anticompetitive or unfair practice against an airline or ticket agent. It also requires DOT to explain its decision-making process and the evidence it considered when making a determination of whether a practice is unfair and deceptive, providing greater transparency to both industry and consumers. This rulemaking could be seen as providing DOT with less flexibility in a Biden administration. A similarly “deregulatory” rulemaking that we may see finalized before the new administration officially takes office is the service animal rule, which, among other things, would align the definition service animal to the less expansive one used by the Department of Justice (only dogs) and allow airlines to treat emotional support animals as pets, which means consumers could be charged a pet fee.
Given changes in leadership and inherent delays in bringing new officials up to speed, incoming administrations can choose to suspend or delay any effective dates of new regulations and/or subject any new regulations to a mandatory review period in the White House Office of Information and Regulatory Affairs (OIRA). While this may still be possible for the service animal rule that has not yet been issued, the new administration may be less to do so for the UDP rule given that it will be effective only 30 days after issued – likely before the new year – rather than the 60-day period typically required for significant regulatory actions.
Ultimately, while we expect the incoming administration will most certainly be laser-focused on ensuring the industry can survive and quickly return to service, we do expect a renewed focus and revisiting of issues in the consumer protection area under a Biden administration, more so than the largely symbolic efforts of the current administration.
Other Important Policy Focuses - Airport infrastructure, Clean Energy & Sustainability
The Biden campaign has been focused on airport infrastructure and this will likely be an important part of the administration’s policy focus. In his recent November Infrastructure Plan, the President-Elect promised to double the amount of money for the Airport Improvement Program and establish a competitive grant program for airport infrastructure. In addition, he has emphasized his focus on fully implementing NextGen technology to modernize the U.S. airspace, improving safety and efficiency. The President-Elect also has promised to invest $400 billion over 10 years in clean energy research and innovation, including fuel efficiency and reducing emissions.
With the global aviation industry still in the midst of surviving the COVID-19 pandemic with no obvious end in sight, the shifts in priorities inherent in any political transition are only likely to be magnified as President-Elect Biden’s administration advances its own policies regarding the near- and long-term survival of the industry.