American Rescue Plan Act Throws a Lifeline to Previously Ineligible Aviation Manufacturers

Late last week, the President signed the American Rescue Plan Act (ARP Act) into law. In addition to extending the Payroll Support Program (PSP), which has been a lifeline for air carriers and their contractors, the ARP Act expands assistance to the aviation industry to include an Aviation Manufacturing Jobs Protection program for qualifying aviation industry manufacturers. This new program establishes a $3 billion payroll support program within the Department of Transportation (DOT) to provide grants to eligible manufacturers and their suppliers to maintain their workforce during the pandemic. The temporary program would require cost-sharing of 50 percent by employers, with 50 percent being contributed by the federal government, and funds would be directed to an eligible employee group comprising of not more than 25 percent of the company’s U.S. workforce engaged in manufacturing or maintenance, repair, and overhaul activities. The funds must be used to retain current employees or to recall employees who were previously laid off and cannot be used for backpay of returning or re-hired employees.

Entities eligible for the program must be U.S. businesses that are engaged in significant aviation manufacturing, maintenance, repair, and overhaul activities and services based in the U.S. and in which a majority of their employees are engaged. Additionally, entities must:

• actively manufacture an aircraft, aircraft engine, propeller, or a component, part, or the systems of an aircraft or aircraft engine under a Federal Aviation Administration production approval; or
• hold a certificate issued under 14 CFR Part 145 for maintenance, repair, and overhaul of aircraft, aircraft engines, components, or propellers (i.e. a Repair Station Certificate); or
• operate a process certified to SAE AS9100 related to the design, development, or provision of an aviation product or service, including a part, component, or assembly.

In addition, an applicant must have involuntarily furloughed or laid off at least 10 percent of its workforce in 2020 as compared to 2019 or has experienced at least a 15 percent decline in 2020 revenues as compared to 2019.

Recipients of funds under the new program will be required to enter into an agreement with DOT lasting no longer than 6 months. In order to be eligible, applicants must refrain from conducting involuntary furloughs or reduced pay rates or benefits for the eligible employee group between the date of application to DOT and the date on which the agreement with DOT is signed. Once an agreement is signed, recipients may not conduct involuntary layoffs or reduce pay rates or benefits during the length of the agreement. Certain categories of manufacturers, including those holding type or production certificates or similar authorizations with respect to transport-category aircraft with a seating capacity of 50 or more, may be prohibited from conducting layoffs of eligible employees for a longer period of time. Specifically, such manufacturers will not be permitted to conduct involuntary layoffs or furloughs, or reduce pay rates or benefits for the eligible employee group from the date of the agreement until September 30, 2021 or the duration of the agreement, whichever is later.

Notably, entities that received funds under the earlier PSP, received payroll tax credits under the CARES Act, or that are continuing to expend funds issued under the Paycheck Protection Program are not eligible for payroll support. Unlike the PSP, this program is being directed by DOT and therefore may be subject to delays as DOT sets up the internal procedures required for its administration. We expect guidance on application deadlines and procedures will be forthcoming but recommend that interested manufacturers begin compiling their financial statements and eligible employee data to enable them to apply as early as possible for timely disbursement of funds.