Running on Empty: A 10-Point Plan for the Aviation and Transportation Industry as It Meets the Challenges and Opportunities Presented by the COVID-19 Coronavirus Crisis

March 31, 2020

Key Takeaways

  • The aviation and transportation industry is facing one of its biggest ever challenges as it finds itself in the eye of the COVID-19 coronavirus regulatory and economic storm.
  • The size and scale of the government support measures across the world is unprecedented and significant assistance is available to firms in the aviation and transportation sector at different levels of the supply chain, from cargo and passenger carriers, manufacturers and selected key ancillary and support services. Understanding and accessing the available support measures in each relevant jurisdiction should be treated as a “business critical” priority for firms in the sector.
  • While the challenges facing many transport operators are significant, there are also unprecedented opportunities for agile and well-advised operators to take advantage of (i) lower cost base (wages, fuel and finance costs are at historic lows); and (ii) government assistance and “one-off” regulatory relief (including generous wage subsidies and expedited merger control measures).
  • Companies that are able to successfully navigate the hostile and volatile market dynamics will stand to reap huge benefits when the COVID clouds lift – the world will not stop forever.

All forms of movement are under serious threat in the current global climate: with an estimated 1/4 of the world’s population in lock down, this unprecedented government intervention has slashed passenger demand and halted the free movement of all but essential goods and key workers. While this is not the first challenge the sector has faced – deregulation, oil shocks, government enforcement actions, September 11, SARS, and the financial crisis – COVID-19 is likely to be its greatest challenge yet. Below we explore recent developments and potential opportunities and strategies for companies operating in this sector to keep the wheels turning.

Transportation firms are fighting a battle – by air, land and sea

In the aviation sector, amid plummeting seat load factors and ticket prices, airlines have slashed capacity and grounded large portions of their fleets. A third of the world’s commercial aircraft are now in storage and Europe’s largest budget carriers have stopped all commercial flights – a dangerous turn of events for an industry known for traditionally high fixed costs and regulation. The drastic knock-on effects for aerospace manufacturers, aircraft lessors and other suppliers are already evident in the hiatus in new and replacement aircraft orders. The world’s major airport owners have also lost value as hub traffic has been decimated. The same has been true for the significant network of duty free retailers and other supporting services (airport facilities, logistics, MROs, cargo) and suppliers that make up the transport ecosystem.

Automotive manufacturers in the U.S., EU and Asia have all applied the brakes with all major manufacturers shutting down production until April and potentially beyond. New order forecasts have already fallen 20% in recent weeks forcing ratings downgrades for major manufacturers.

Shipping operators who were hoping for a smoother ride after a ceasefire in the trade war between China and the U.S. are now navigating unchartered waters as the level of idle container capacity has already eclipsed the height of the 2008 financial crisis. Over the past three weeks, some 30% to 60% of weekly outbound capacity has been withdrawn from the Asia-Europe and Transpacific trade, as well as from intra-regional routes. While the larger shipping players will be better placed to ride out the storm, smaller operators who run crucial secondary routes that feed major porshuts may be challenged by limited cash reserves. This will place further strain on a spluttering supply chain.

The world’s cruise ship and ferry providers have dropped anchor in the hope of riding out the storm, but many are in danger of sinking as governments are reluctant to throw life lines to the largest cruise operators registered in offshore tax havens.

It is impossible to predict with certainty when economic turbines will start to turn again but companies who are able to navigate these challenges and position themselves well in the coming months will be more able to secure the opportunities that will undoubtedly emerge once we are on the road to recovery.

The “10-Point Plan” for surviving COVID-19: considerations for the aviation and transportation industry

1. Understand the recent government assistance measures1

Governments all over the world are drawing up a range of emergency assistance measures to support businesses in key industries, including in the aviation and transportation sectors. The fine print of the industry assistance and bail-out packages is still emerging in the U.S., UK and EU and further measures may be necessary as the pandemic continues. What is already clear is the unprecedented scale and depth of these packages. Some of the most relevant government assistance measures are outlined below:

US government support

  • Authorization for $25 billion in loans and loan guarantees for air carriers and $4 billion in loans and loan guarantees for air cargo carriers. Also included in the bill is authorization for $17 billion in loans and loan guarantees for business critical to maintaining national security, which is reported to be directed at The Boeing Company.
  • An additional $25 billion in grants are available to passenger air carriers for employee wages, salaries and benefits to workers in return for their agreement not to lay off employees before September 30, 2020 or modify collective bargaining agreements.
  • Grants of $4 billion and $3 billion, respectively, are available for employee wages, salaries and benefits for the air cargo industry and for contractors directly related to air carriers such as caterers, ground handling, ticketing, etc. There is additional relief for air carriers with respect to certain federal excise taxes.

The bail out measures prohibit layoffs until September 2020, stock buybacks and dividends. Executive remuneration will also be capped to 2019 levels under the terms of any deal. The government will also take an equity stake in the airlines until the loans are paid back.

UK support measures: The UK government has avoided committing to an industry-wide aviation bail out but has hinted at acquiring equity stakes and partially nationalising some key airlines as a last resort. Struggling UK regional carrier Flybe has already ceased trading and been placed in administration, and Virgin Atlantic has been reported as next airline in line to request an emergency bail out. It is unlikely to be the last and the UK government is under increasing pressure to spell out its approach more clearly as other airlines may follow. Europe’s largest low-cost carriers Ryanair and EasyJet have ceased all commercial flights until June.

Along with other UK businesses, transportation companies will be able to utilise significant UK government support, including £330 billion government-backed loans, including the COVID-19 Corporate Financing Facility (“CCFF”), which is coordinated jointly by HM Treasury and the Bank of England. The scheme will provide funding to large UK businesses by purchasing commercial paper of up to one-year maturity. The facility is intended to provide financing on terms comparable to those prevailing in markets in the period before the economic shock caused by the pandemic, and will be made available to firms able to demonstrate that they were in sound financial condition prior to the COVID-19 shock. The UK government will also fund up to 80% of wages for “furloughed” employees. See further Dechert advice on available employee support below.2

EU subsidies: The European Commission’s antitrust department has confirmed that all exceptions available under state aid rules apply in the circumstances so governments can grant selective subsidies and/or purchase stakes in national businesses. The aviation industry is an obvious beneficiary. These support measures still need to observe certain rules but flexibility is the key word both procedurally and substantively. The speed of the Commission’s approval of COVID-19 State aid schemes (less than 48 hours) has been remarkable.

In the EU nation states:

France has launched an unlimited backstop of at least €300 million for corporate lending and indicated it would “do whatever it takes”. Transport operators in distress can immediately stop paying direct taxes and social charges without penalty for 90 days. The state owned export credit bank BpiFrance has also increased its guarantee from 70% to 90% to secure new credit lines.

Spain announced a €100 billion corporate guarantee to cover working capital and liquidity needs and a 75% discount on social security contributions for temporary lay-offs.

The German federal government agreed to provide an unlimited amount of liquidity via a special loan guarantee and loan facility program to be offered by its state-owned development bank KfW. In addition, the German parliament eased the eligibility requirements for Short-Time Work relief which will partially reimburse employees for reduced hours and match social security contributions for hours lost. On 27 March, Lufthansa announced that it would use this instrument for at least 31,000 of its employees until 31 August. German tax enforcement has also been deferred until December 2020 if failure to pay is linked to COVID-19.3

2. Have a clear strategy for accessing and utilising support

The practical steps required for accessing government assistance vary between jurisdictions and will become clearer in the coming days. The race to access immediate support may be fierce, including for key airlines and key manufacturers, many of whom have already announced temporary or part plant shut downs, including in the U.S. and Europe. It is not entirely clear whether these assistance measures will be made available to the vast network of ancillary services and smaller regional networks that make up the aviation and transport ecosystem. The government may well hope that by protecting only the marquee industry players, sufficient confidence will be restored and the benefit will “trickle down” to the remaining industry stakeholders once normal service is resumed.

While flagship carriers and vital manufacturers have a strong chance of securing government backing, they will obviously do everything possible to avoid accepting taxpayers money as the conditionality that comes with government assistance can be burdensome and may dampen profitability and management control (and share prices) when the world returns to good health. The individual strategy of each firm will vary depending on the cash position and financial strength of each individual company.

Regardless of the final scope of the measures in each jurisdiction, companies must remain vigilant and ensure that they meet the strict criteria for receiving available government assistance. In the absence of clear government guidance, obtaining legal certainty on the fine print of some measures may be difficult, particularly if the government machinery functions slowly during lock-down.
In practical terms this means that senior managers and in-house legal teams in the airline and transport industry should immediately devote resources to ensure that they understand the key eligibility criteria for government support and seek specialist external assistance if they do not have adequate internal government liaison, lobbying or legal capability to determine if the available measures are (i) immediately available to their business; and (ii) strategically beneficial in the medium and long term.

3. Take advantage of new legal protections (or amnesties)

While governments scramble to offer relief to struggling firms in key industries, there will be a period of legal uncertainty around the terms and eligibility criteria for accessing support. This will create opportunities for well-advised firms to position themselves to take full advantage of any support packages available (including indirect beneficiaries such as MROs, spare parts and aviation technology and systems providers who stand to benefit from assistance granted to the larger operators).

  • Resist total dependence (if at all possible): During this transition period, companies should also stay alert to new opportunities as fragmented market conditions and vastly different consumer patterns will create new (but potentially fleeting) revenue and margin upsides. Taking these opportunities may make the difference to companies in the coming months – firms that can navigate this period without government support will enjoy a much clearer path forward when the COVID-19 clouds clear. Conversely airlines that rely on government handouts will be at risk – governments will not bankroll entire sectors and most of the measures announced will be temporary and subject to strict conditions. There are alternative ways to profit from government interventions without simply receiving hand-outs. Firms whose management is able to understand the impact of these interventions at the earliest opportunity will be able to deploy resources swiftly to maximise the benefits. For example, some airlines received a minor temporary windfall from the mass consumer rush to beat government border closures as lock-downs set in.
  • Maximize the benefits of cooperation initiatives: The crisis will exceptionally legitimize certain forms of cooperation with competitors, deemed critical to the COVID-19 response. The European and national antitrust authorities in the EU have issued a joint statement that they will tolerate cooperation between companies to ensure the supply and fair distribution of scarce products. EU antitrust authorities will not intervene against necessary and temporary measures to avoid shortages of supply. Earlier the Norwegian authority had allowed Norwegian airline carriers to coordinate to maintain critical services for the Norwegian population and Dutch, German and UK supermarkets were given the green light to collaborate to ensure the supply of food. These are not blanket waivers as there needs to be good reason for the otherwise anti-competitive cooperation, and the measures must be temporary. The authorities have further made it plain that the present flexibility must be the occasion of any wider anti-competitive arrangements.
  • EU competitor cooperation: Airlines might be able to cooperate on the provision of cargo services while passenger traffic has almost come to a halt worldwide. They will not need to worry about the 80/20% slot usage rule which will be suspended until 24 October with retroactive effect to 1 March for all flights and to 23 January for flights between the EU and China or Hong Kong.
  • U.S. expedited deal reviews: DOJ and FTC has announced a fast track system4  for voluntary review of proposed collaborations among competitors in selected areas that relate to COVID-19 including temporarily combined production and distribution, shared equipment, technical know-how and joint purchasing arrangements. If a review is requested for a proposed collaboration that is related to “public health and safety” to combat COVID-19, the DOJ or FTC will act promptly to respond within seven calendar days of receiving all necessary information.
  • Stop, collaborate and … protect your interests: Firms should deploy their best and brightest operational personnel to be involved in any competitor “crisis collaboration” process to try and maximize the value derived from both a public safety and purely commercial perspective. Senior management should remain involved in overseeing any “crisis collaboration”, as there may be a heightened risk of commercially valuable and sensitive information inadvertently being shared with competitors, which, may undermine a company’s competitive advantage going forward and indeed risk being outside the safe harbor announced by the authorities. Firms who exchange information with competitors for COVID-related initiatives should ensure exchanges are kept to a necessary minimum and enforce a strict internal approval process before any information is shared externally. Ethical walls and ring-fencing of sensitive commercial information may be useful safeguards. Care should be taken regarding any commercial know-how obtained during contact with competitors during the collaboration process before they are utilized by the business going forward.

Critical infrastructure sectors – make hay while the sun shines: Some operations will be shielded from the full impact of the global downturn by virtue of their strategic importance. In the U.S., Transportation systems has been identified as a critical infrastructure sector by the U.S. Department of Homeland Security that are permitted to remain open at on-site locations, with employees in numerous functions with transportation and logistics identified as essential to continue operations, including the following:

  • Critical manufacturing has likewise been identified as critical infrastructure sector, including workers necessary for the manufacturing of materials and products needed for transportation, energy, communications, emergency services, and the defense industrial base
  • .Employees supporting or enabling transportation functions, including dispatchers, maintenance and repair technicians, warehouse workers, truck stop and rest area workers, and workers that maintain and inspect infrastructure (including those that require cross-border travel)
  • Employees of firms providing services that enable logistics operations, including cooling, storing, packaging, and distributing products for wholesale or retail sale or use
  • Mass transit workers
  • Workers responsible for operating dispatching passenger, commuter and freight trains and maintaining rail infrastructure and equipment
  • Maritime transportation workers – port workers, mariners, equipment operators
  • Truck drivers who haul hazardous and waste materials to support critical infrastructure, capabilities, functions, and servicesAutomotive repair and maintenance facilities
  • Manufacturers and distributors (to include service centers and related operations) of packaging materials, pallets, crates, containers, and other supplies needed to support manufacturing, packaging staging and distribution operations
  • Postal and shipping workers, to include private companies
  • Employees who repair and maintain vehicles, aircraft, rail equipment, marine vessels, and the equipment and infrastructure that enables operations that encompass movement of cargo and passengers
  • Air transportation employees, including air traffic controllers, ramp personnel, aviation security, and aviation managementWorkers who support the maintenance and operation of cargo by air transportation, including flight crews, maintenance, airport operations, and other on- and off- airport facilities workers
  • Various local shelter-in-place Orders have incorporated exceptions for “essential businesses”, “life sustaining businesses” or similar classifications, with sub-sectors needed to keep current transportation systems running being favored over transportation equipment manufacturing in certain instances. Each transportation business must analyze the national, state and local orders applicable and whether (or which) portions of its operations must cease

4.  Seek new M&A opportunities

In an anxious transport market with patchy and sometimes bipolar consumer demand, the firms that can maintain their market position, economies of scale and secure supply chains will emerge healthiest. The current distressed transport market will undoubtedly create new horizontal and vertical M&A opportunities and threats for carriers, manufacturers and support services (logistic support, MROs, spare parts, components, technology suppliers).

  • Revised valuations must reflect the new (post-COVID) fundamentals: When assessing potential acquisition or merger targets, a new and important part of the M&A analysis must be the assessment of potential value that can be unlocked by a target company accessing the new government support initiatives. This could be a major source of hidden value and any transaction diligence must now focus on this key value driver. In the short term, any such M&A activity, will most likely need to occur within a temporarily modified competition framework, open to new flexible and expedited solutions as government grapple with urgent priorities and public security concerns.
  • Urgent Transactions: rapid private or public takeovers may be needed to ensure the continuity of some businesses. These transactions might require prior merger approval.6 Although antitrust authorities worldwide are grappling with agile working and some agencies are encouraging companies to postpone seeking merger clearance for their transactions, the authorities will need to find ways of dealing with these situations e.g. allowing (ad hoc) derogations from ex-ante merger approval requirements and/or applying the failing-firm defense to allow otherwise problematic mergers, which are critical in the current circumstances, to proceed.
  • Fortune favours the brave: Firms with strong cash positions who were already considering M&A activity may be able to take the opportunity of expedited merger clearance processes in various jurisdictions to rapidly seal their deals, if companies are brave enough to act decisively in a market paralysed by fear. Potential targets of hostile M&A activity should also start to prepare defensive strategies with corporate counsel who understand the intricacies and challenges of the aviation sector.

 5. Take advantage of volatile oil prices

A surprisingly small number of airlines and transport operators will instantly benefit from the dramatic drop in oil prices. Most airlines will have already hedged their positions by locking in fuel prices that reflect more positive market conditions some months ago. The majority of airline carriers are reported to have already hedged between 30% and 90% of their expected fuel needs in coming months. For those operators who have not hedged a large proportion of their fuel supply, there may be a limited window to lock in the historically low rate and secure a distinct competitive advantage for the recovery period. The prolonged drop in oil prices risks distorting the playing field heavily in favour of operations who have not pursued a widespread fuel hedging strategy and are therefore are not bound by historic high fuel prices. Alternatively, if the supply war between Russia and Saudi continues to create extreme volatility, then a hedged strategy may provide some much needed certainty for operators, even if they miss the fleeting chance to lock in historically low oil prices. 

The Chinese and Indian aviation industry does not generally hedge its fuel costs and this could play into their hands as major UK and European competitors may effectively end up trying to compete with double the cost base in coming months unless oil prices return to previous levels or they are able to close out their positions or find credible legal justifications to avoid being tied to hedging contracts. Some potential contractual legal arguments that may be deployed against counterparties to unwind contractual positions in extraordinary circumstances are discussed in more detail below.

6. Re-examine contractual relationships

In times of crisis, parties to an ongoing or committed contractual relationship are likely to seek to avoid proceeding with their contractual obligations pursuant to several legal doctrines. When it comes to the enforcement of contractual terms, transport operators will need to explore both (i) offensive strategies against counterparties (large customers and trade debtors) who owe money to the business and are trying to use the COVID-19-related arguments to avoid payment; and also (ii) defensive strategies against suppliers and creditors who will be aggressively trying to recover cash.
When “forces of nature” are at play, as they are during the current pandemic, parties may seek to avoid those obligations through a force majeure or MAE (material adverse event)/MAC (material adverse change) clause in their governing agreements.

  • Whether a force majeure or MAE /MAC clause excuses a party from complying with its contractual obligations depends entirely on the language in each respect agreement, including whether such a clause exists and whether it contemplates the current pandemic.

Certain extra-contractual bases also exist for seeking to excuse contractual performance, including, but not limited to the doctrines of (i) frustration of purpose, (ii) impracticability of performance, and (iii) impossibility of performance.

  • Frustration of Purpose: The “frustration of purpose” doctrine may be applicable when an unforeseen event causes the purpose of the contract to be frustrated. The applicable standard for this doctrine to apply is high: usually, the essential value of the entire contract must be frustrated through no fault of the party seeking relief, with courts usually requiring the cause to have been an unforeseeable event.
  • Impracticability of Performance: When performance has become significantly more burdensome than the parties anticipated due to an unforeseen event, resulting in an extreme economic burden, a party’s performance might be excused under the doctrine of impracticability of performance.
  • Impossibility of Performance: If performance has become literally impossible due to an unforeseen event, performance might be excused under the doctrine of impossibility.In order to be in a suitable position in the event your counterparty seeks to rescind an agreement or to be excused from performing thereunder, it is important to have a good understanding of what rights and remedies those agreements provide in each governing law jurisdiction.7

As courts around the world struggle to react to the changing demands of remote working, companies should also factor in delay and the practicalities of modified court filing processes into their enforcement strategy, particularly if urgent injunctive relief is being filed against counterparties in multiple jurisdictions.

7. Manage revenue and cash shortages (up and down the supply chain)

“We have a liquidity crisis coming at full speed – no revenues and costs still on our [books], so we desperately need some cash.” – Alexandre de Junia, CEO, The International Air Transport Association (IATA)

Despite the liquidity squeeze, some major commercial airlines in the U.S. and EU, have been able to tap fairly significant bank credit facilities in March to support their deteriorating cash positions. Major actors in the aerospace and manufacturing sector too have bolstered their cash position by a combination of cost cutting (including suspension of dividends and buybacks) and accessing the bank markets (e.g. Boeing drawing on its $13.8 billion loan facility which loan it obtained in February). As for the aircraft leasing market, lessors are customarily hit later and the impact is not as severe as for the airlines or manufacturers themselves. The lessors’ portfolios traditionally consists of new model aircraft. In a workout or bankruptcy, these aircraft are usually the last to be let go by the airlines, so the impact on lessors may be less immediate.

In light of the almost entire shutdown of transportation services we recommend that providers shift their focus to crisis management, including:

  • COVID-19 poses significant liquidity and revenue challenges for an unknown period of time and requires support from existing stakeholders.
  • Companies should prepare bare bones contingency cash flow projection and focus on all area where savings can be accomplished.
  • Monitor closely newly announced Governmental aid programs and apply for aid as soon as possible.
  • Companies should focus on potential work force reductions including implications from new governmental regulations, laws on mass lay-offs (e.g. WARN acts in the U.S.) and other restrictions on such reductions.8. Deploy defensive strategies for surviving financial distress.
  • Emergency triage: Prioritising strategically important stakeholders at all levels of the supply chain will become a necessary focus for transportation managers. Suppliers and customers are losing cash at all levels of the supply chain, therefore it is imperative that businesses (i) clearly identify which stakeholders are at the greatest risk of collapse; and (ii) direct scarce resources and assistance to those stakeholders who serve to cause the most disruption and damage to your operations if they fail.

As cash shortages may reach critical levels in coming months, businesses will have to make tough choices about which customers and suppliers they wish to support or prioritise in an extremely distressed market. This will require not just the standard assessment of the financial reserves and balance sheet analysis, but also assessing whether customers and suppliers are eligible for immediate government assistance. By myopically prioritising short term liquidity issues and failing to support vulnerable and dependent suppliers and customers, including smaller regional operators who keep the supply chains robust and diversified, firms risk throwing the baby out with the bath water and losing alternative suppliers and customers that are critical to their long term recovery and continuity. Further practical measures for companies and directors to consider include the following:

  • Companies should review all of the funded debt documents for draw availability, potential defaults, creditors’ remedies, and potential application of MAC and force majeure clauses.
  • Companies should consider engaging in discussions with creditors regarding forbearance, waivers, extensions, and/or restructuring.
  • An assessment of the strategic alternatives-taking into account COVID-19 and the resulting financial distress and uncertainty across the market-should be developed.
  • Boards of directors should focus on strict adherence to their duties, including: 
    • Ensuring compliance with their duty of care and duty of loyalty.
    • Ensuring appropriate documentation of the board’s actions and deliberations.
    • Identifying possible conflicts of interest, adhering to disclosure requirements, and strict management of inside information.

9. Maintain compliance and other policies and procedures – protecting against civil litigation and regulatory action

Avoid playing “COVID Roulette” with existing laws: Businesses that flout and circumvent existing laws and regulations, including antitrust, consumer protection, anti-bribery, corruption and trade laws will face a reckoning once the pandemic is controlled.

While it may be tempting to bend rules in extraordinary circumstances, there is no “COVID-19 defence” for misconduct.8 Failure to realize this will expose organisations to liability, class actions, prosecution or potential debarment in the long run when regulators and prosecutors examine conduct in the cold light of day. Significant reputational damage and government penalties await those which play fast and loose with the rules or are shown to have tried to unduly benefit from a global public disaster. The decade of government enforcement actions, individual prosecutions and class actions that followed the 2008 financial crisis should serve as a stark warning.

In order to mitigate these risks the following compliance steps should be applied to a dislocated workforce who may continue to work remotely:

  • Senior management should ensure the right “tone from the top” - reminding employees that their compliance obligations apply equally in bad times as in good.
  • Consider using online tools to refresh compliance training.
  • Review social media policies:
  • Continue any existing litigation holds or preservation notices and maintain document retention policies and systems, including making necessary adjustments to retain information generated in a remote workplace.
  • Maintain all documentation policies and procedures related to testing, regulatory communications, customer communications and other critical business information that could later become relevant to civil litigation or regulatory proceedings.
  • Ensure due diligence on any investments or acquisitions include compliance reviews to avoid overpaying or worse, future enforcement action

Short-term demands often consume individuals’ and businesses’ attention in times of crisis. Companies nevertheless need to maintain a long term focus by maintaining strong compliance functions and good business practices (including data privacy, document retention and control) in the digital age where business is being conducted remotely.

Companies that do not remain vigilant could face damaging evidence in civil litigation and regulatory actions in the future.

10. Employment issues across jurisdictions

Ensuring employee safety: Employers around the world should follow government guidance to protect employees and comply with applicable worker safety guidelines9 by jurisdiction. Although these vary according to national government, they are likely to include (i) causing all employees who can accomplish their work remotely to work remotely, (ii) non-discriminatory screening of employees for fever or other symptoms of COVID-19, (iii) maintaining at least 6 feet of space between individuals working on-site, with potential staggering and/or reduction of staff as needed to accomplish distancing requirements and (iv) adopting all required sanitization and cleaning measures.

Realizing cost savings: In considering cost saving measures, transportation employers must consider both short term cost controls and long-term needs to be able to resume and ramp-up operations quickly as restrictions ease and/or are revoked. Employers must analyze all governmental aid programs available that encourage employers not to sever employment of employees, including reimbursement programs for paid employee sick leave or family and medical leave. Under the U.S. federal stimulus legislation (CARES), employers can recoup expanded paid sick and leave time through retaining employer payroll tax and employee payroll tax withholdings, as well as employee income tax withholdings, across all employees (not just employees needing leave), with the ability to apply for direct reimbursement if payments exceed tax and tax withholdings eligible to be retained by employers.

Dechert is actively advising companies across industries on how best to utilize the recent government support packages in various jurisdictions including the U.S., UK10 and Europe.


It is clear that these are extraordinary times for all industries, but particularly for aviation and transport. While some operators will fail to rise to the challenge, there will be some agile and well-advised operators11 who take full advantage of the rare opportunities that this period will create. Never has the movement of critical goods and people been so important.

Governments have never been more willing to actively assist commercial transport operators to deliver key goods and people and keep the main arteries of the economic supply chain alive. At the same time, there have rarely been better opportunities for transportation companies to lower their traditionally high cost base (wages, fuel and finance) and secure economies of scale (via expedited M&A opportunities). High costs and regulation have burdened the industry for years and this may be the time for some operators to finally buck that trend. While the current outlook may seem bleak one thing is certain - the world will move again and those who are able to weather this storm may be able to rise to new heights.



  1.  Government assistance measures in multiple jurisdictions were subject to finalisation at the time of writing. 
  2. Dechert OnPoint: COVID-19 Coronavirus Business Impact: UK Coronavirus Job Retention Scheme – What We Do and Don’t Know So Far
  3. Dechert OnPoint:COVID-19 Coronavirus (Germany): Protective Shield to Mitigate Impact for Companies and Employees
  4. Dechert OnPoint: COVID-19 Coronavirus: DOJ and FTC Expedite Antitrust Reviews for Competitor Collaborations
  5. CISA Guidance on Essential Critical Infrastructure Workers
  6. Dechert OnPoint: COVID-19 Coronavirus: DOJ and FTC Expedite Antitrust Reviews for Competitor Collaborations 
  7. See UK analysis here and German analysis here
  8. Dechert OnPoint: COVID-19 Anti-Corruption Considerations
  9. Dechert OnPoint: EEOC Offers Guidance to Employers During the COVID-19 Pandemic
  10. Dechert OnPoint: COVID-19 Coronavirus Business Impact: UK Coronavirus Job Retention Scheme – What We Do and Don’t Know So Far; and Dechert OnPoint: COVID-19 Coronavirus Business Impact: UK Coronavirus Job Retention Scheme – further guidance issued 
  11. For the full suite of Dechert materials on the impact of Covid-19 on your business, please visit here

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