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Airlines Can Consolidate Routes While Receiving Coronavirus Aid, Says USDOT

By John Bromels - Mar 31, 2020 at 1:24PM

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The new rule will help more airline industry companies qualify for bailout funds.

The U.S. Department of Transportation has issued guidance paving the way for airlines like Southwest (LUV 2.45%) and Delta (DAL 2.17%) to consolidate some routes while remaining eligible for stimulus funds. 

In an order on Tuesday, USDOT clarified that airlines currently serving multiple airports within a metropolitan area could consolidate their operations to a single airport without running afoul of Treasury Department guidelines issued Monday. 

The clarification is a boon for airlines struggling to stay afloat as coronavirus fears and related travel restrictions have caused ridership to evaporate.

A Boeing 787 airplane in flight.

Image source: Getty Images.

Between a rock and a hard place

At first, the CARES Act -- the $2 trillion emergency coronavirus relief package signed into law by President Trump on Friday -- looked like a big win for airlines. It included $25 billion in loans earmarked for passenger air carriers and another $25 billion in payroll-protection grants.

But the money came with an unpleasant string attached: keeping existing service routes open. Meeting that condition could have forced airlines to eat through any money they received by running multiple flights to airports serving the same region. However, the USDOT has now said that as long as an airline continues serving a metropolitan area, it can consolidate its flights to a single airport in that area.

So, for example, if a carrier was currently operating flights from Atlanta into Dulles, Reagan, and BWI -- all of which serve the Washington, D.C., area -- it could consolidate its Atlanta-to-D.C. flights into just one of those three airports while still receiving loans and grants through the program. 

The order does not allow multiple carriers to combine operations by offering single flights for which more than one airline sells tickets.

John Bromels has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Southwest Airlines Co. Stock Quote
Southwest Airlines Co.
LUV
$39.28 (2.45%) $0.94
Delta Air Lines, Inc. Stock Quote
Delta Air Lines, Inc.
DAL
$33.93 (2.17%) $0.72

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