Archive for category: Diversified Industries

Here’s What You Need To Know

Most Americans don’t think about the nation’s supply chain, but recently, they’ve discovered the consequences of its fragility. Shortages on important technology, like microchips, have driven up the prices of everything from cars to computers – if they’re even in stock – and experts predict it will take years for the marketplace to recover. While automobiles and the latest tech gadgets might be top-of-mind for the chip crisis, Goldman Sachs says the shortage has affected at least 169 industries, including the solar sector, household appliances, and even Fido’s grooming.

COVID-19 presented obvious challenges to America’s supply chain, but so, too, did lesser-known factors. These issues, unlike COVID, may persist for years, complicating efforts to replenish our tech materials supply and increasing costs for businesses and consumers. Public policy plays a key role in rectifying the problem, but many in and out of government are skeptical about getting involved. Here’s what industry public affairs professionals need to know.

The Pandemic Exposed Weak Links in Our Supply Chain That Will Take Years To Fix

CORONAVIRUS CHAOS: While the global marketplace screeched to a halt as public safety became the world’s foremost concern, consumer demand for products requiring microchips skyrocketed. Manufacturers did not anticipate the growth in electronic sales, which was the highest in a decade thanks to a new work-from-home reality, as well as limited recreational possibilities during lockdowns heightening demand for “home entertainment gadgets.” Meanwhile, car companies, concerned homebound Americans would curtail demand, canceled microchip orders, only to discover rapidly rebounding sales with pandemic-friendly road trips and an eventual return to normal. But, when they went to place orders for new microchips, they found themselves at the end of the line, behind more profitable sectors. Meanwhile, nationwide lockdowns shut down or reduced activity at key chip production facilities in places like Taiwan, responsible for around two-thirds the world’s microchips, and Malaysia, where a number of German and Japanese firms manufacture semiconductors and related electronic components.

MOTHER NATURE STRIKES SUPPLY CHAIN: The past year also saw “acts of God” disrupting the global microchip supply chain. Texas’s February 2021 winter storms forced Samsung, Infineon, and NXP to shut down their chip manufacturing due to lack of power. Then, a massive drought in Taiwan reduced global production, as chip manufacturers “require[d] voluminous quantities of water to churn out chips” amidst the island nation’s worst water shortage in 56 years. An enormous fire in March 2021 at Renesas, one of the world’s leading auto chip makers in Japan, only worsened the shortage, with executives estimating it would take up to four months to come back online. Just one month earlier, Renesas’s factory had sustained damage from an earthquake.

America’s Microchip Shortage Isn’t Merely Another Painful Byproduct of the Pandemic. It’s Also Policy Consequence.

OFFSHORE TRADE OFF: While Western firms offshoring production of microchips has meant cheaper products for consumers, it also concentrated the supply chain in East Asia, leaving critical materials abroad. Today, Taiwan generates 65 percent of all global revenues for outsourced chips. Just one Taiwanese company, TrendForce, is responsible for more than half of the world’s semiconductor supply, including 80 percent of microcontroller units that direct car functions like power windows, braking, and headlights, and 92 percent of the world’s most sophisticated chips, including 1.4 billion smartphone processors. Since 1990, the U.S. share of global chip manufacturing fell from 37 percent to just 12 percent, even as half of all companies were headquartered in America. The Semiconductor Industry Association says that without significant government intervention, the U.S. will soon only maintain 6 percent of the world’s chip manufacturing capacity.

CHINA READIES FOR DOMINATION: In December 2020, America announced sanctions on China’s largest chip manufacturer over links to the Chinese military. Chinese firms responded by stockpiling chips for their own use – a sign of what looms on the horizon. The Semiconductor Industry Association warns China is on track to become the world’s largest microchip manufacturing location by 2030. An American adversary, policymakers see Chinese domination in the tech market as not only an economic threat to the U.S., but also a major security concern. Today, China controls 40 percent of the world’s back-end manufacturing, and while the country currently lags in new innovation, it is increasingly adept at copying the works of others and has invested heavily in building a domestic semiconductor industry.

President Biden and Congress Want To Help, but Some Legislators and Activists Aren’t So Sure Industry Deserves It

LEGISLATION WITH LEGS: In June 2021, the U.S. Senate passed with a large bipartisan majority the United States Innovation and Competition Act (USICA), a $250 billion bill “designed to boost U.S. semiconductor production.” It contains the CHIPS for America Act, allocating $52 billion for domestic semiconductor manufacturing, including $2 billion for “legacy chips” found in the most common automobiles. U.S. Secretary of Commerce Gina Raimondo estimates that between 7 and 10 new semiconductor plants will be built as a result of USICA’s passage, generating at least $150 billion in private sector investment. The legislation awaits action in the U.S. House of Representatives.

BIDEN WEIGHS IN: After a 100-day review, the Biden Administration offered its list of recommendations for fortifying the semiconductor industry. In its brief, The White House argued the “private sector must take the lead” but said the U.S. government can “facilitate the information flow between semiconductor producers and suppliers and end users.” President Biden says he wants urgent legislative action taken, calling on American corporations to bring their manufacturing home and arguing it would be better for jobs and national security if they did. His administration has also begun mediating talks among chipmakers and the industrial sectors suffering from the shortages, with officials insisting that new transparency measures will make things easier. But, industry leaders say they’re still frustrated by the lack of details or deadlines for production.

SKEPTICS ACROSS THE IDEOLOGICAL SPECTRUM: While industry embraces legislative proposals to address the problem, there are activists raising concerns – and lawmakers are paying attention. Sen. Bernie Sanders (I-Vt.), who voted against USICA, accused lawmakers of giving a bailout to offshoring manufacturers. Environmental activists also expressed worries, complaining that any new manufacturing would lead to more carbon emissions. On the right, Sen. Pat Toomey (R-Penn.) said he opposed the legislation because it was Chinese-style central economic planning, while Sen. Rick Scott (R-Fla.) argued America could not afford more debt. Media outlets and think tanks also spoke out against it, with Reason arguing it was a “massive handout” and the Hudson Institute explaining it would put America at a disadvantage in the long run. Even the business-friendly Wall Street Journal is skeptical it would make a difference.

While some lawmakers and Biden officials want to encourage domestic investments to help address challenges causing chip shortages, others in and out of government are skeptical – upset by industry offshoring in the first place, concerned about industry’s environmental impact, and disinclined toward industrial policy and corporate subsidies. Public affairs professionals will have to understand and navigate this scrutiny to ensure the industry can leverage the policy opportunities to address the shortages and satisfy consumer demand.

Here’s What You Need To Know

As the dust settles on the election results, it is clear that regardless of the outcomes in the Georgia Senate runoffs, President-elect Biden will face the most closely divided government in 20 years, with the thinnest margins separating the parties in Congress since President Bush took office in 2000. Similar to the forthcoming 117th Congress, in 2001, the 107th Congress had a 9-seat majority in the House and an evenly divided Senate (until Jim Jeffords switched parties in May of 2001).

At first, this division seems like a uniquely challenging circumstance that will ensure continued gridlock, but history suggests that may not be the case on every issue. Indeed, closely divided government has been the norm over the past four decades, which has seen only four instances of one-party controlled government. Through all of those presidencies – even the vitriolic past four years – major legislation became law when there was cross partisan agreement on a solution to an issue that had an existing coalition of support. We saw this sort of bipartisan compromise for major legislation in 2001with No Child Left Behind, in 2012 with the JOBS Act, and most recently with 2020’s Great American Outdoors Act.

This history suggests Biden will have an opportunity to pass major legislation in his first two years in office, but what issue fits the criteria for success? While Infrastructure Week has become a running joke in Washington, infrastructure investment could provide such an opportunity for major bipartisan legislation. Whether infrastructure spending proves to be Groundhog Day for obstruction or Ground Zero for compromise depends on what the definition of infrastructure is. Here’s what you need to know to leverage this opportunity:

Is There an on Ramp for Roads and Bridges?

Earlier this fall, Congress once again punted on a long-term surface transportation spending bill. In September, after facing pressure by many leaders in the transportation industry, Congress passed a one-year funding extension for the Fixing America’s Surface Transportation Act. The extension for this Obama era bill included over $13 billion for the Highway Trust Fund and provided some certainty to states and municipalities grappling with budget shortfalls stemming from the pandemic. Hopes of a long-term reauthorization bill – which is required every five years after the last bill is passed – faded when Republicans balked at the Democrats’ $494 billion highway bill that passed the House over the summer. The main source of contention was inclusion of measures to address climate and environmental concerns.

Little is likely to change in the forthcoming Congress, as the House will continue its climate push and the debate over how to pay for the bill remains unsettled. The gas tax revenue that traditionally funds highway projects under the law has dwindled as CAFE standards lead to more fuel efficient vehicles and more hybrids and electric vehicles hit the road. That means companies and industries hoping to see infrastructure investment pass Congress will need to get creative about where such investments might focus.

Can the Digital Divide Bring Washington Together?

In his campaign plan to “Build Back Better,” President-elect Biden noted, “As the COVID-19 crisis has revealed, Americans everywhere need universal, reliable, affordable, and high-speed internet to do their jobs, participate equally in remote school learning and stay connected.” Biden pledged, “This digital divide needs to be closed everywhere, from lower-income urban schools to rural America …” The pandemic has indeed exposed and exacerbated the digital divide for both online learning to remote working, with tens of millions of Americans in both rural areas and urban centers lacking the internet connectivity to log on and join their peers. This challenge provides a unique cross-partisan opportunity for lawmakers to build an urban/rural coalition to bring high speed internet access to underserved communities. In addition to President-elect Biden’s plan, Senators John Cornyn (R-TX) and Joe Manchin (D-WV) have introduced the Eliminate the Digital Divide Act.

Delivering high-speed broadband to underserved urban and rural communities would positively impact agriculture, healthcare and educational outcomes while opening up more opportunities for more workers to work remotely. Of course, reaching bipartisan agreement on the goal does not mean the debate is settled. From how to pay for broadband rollout, to whether a return of net neutrality rules discouraging private sector investment, to what equipment can or should be used in 5G networks – not to mention by whom and how those networks should be built – remain to be settled. 

The Energy Transition Has To Be Built Before It Can Happen.

President-elect Biden has made clear he will move aggressively to address climate change in his Administration. While much of those plans will face opposition from Republicans – and even some Democrats – on Capitol Hill, some of his plans may find bipartisan agreement. Biden’s vow to add 500,000 public charging stations for electric vehicles to highways and roads across the nation provides business opportunities for EV manufacturers, utilities, and charging equipment and service companies. These private sector entities are all hoping to lead the way in filling the “range anxiety” inducing void of charging stations across much of the country. However, regulators have to let them do it. Meanwhile, efforts to phase out internal combustion vehicles have begun cropping up. In California, Governor Gavin Newsom recently signed an executive order that prohibits the sale of new internal combustion vehicles in the Golden State after 2035, and regulators in New Jersey recently recommended the state adopt similar measures. However, such moves require enough places to “fill up” citizens’ EVs.

Beyond his plan to accelerate the nation’s transition to electric vehicles, Biden has emphasized his ambitious plan to invest heavily in renewable energy infrastructure for both economic stimulus and emissions reductions. Such plans could be hindered by Republican skepticism as well as progressive demands. Renewable infrastructure requires a range of approvals, like any other such project, and Biden will face progressive pressure to return environmental regulations that were reduced by the Trump Administration to ease infrastructure reviews and approvals. In addition, renewables such as wind and solar remain intermittent power sources requiring peak demand support from natural gas powered plants and other existing energy fuel sources until such time as battery storage technology can mature. As Sen. Lisa Murkowski (R-AK) has signaled, while Republicans seek to protect domestic oil and natural gas production, they could support federal spending to boost research and development of wind and solar technologies, as well as investments in smart grid and electric vehicle infrastructure. However, such support is likely to require the Biden Administration to recognize some of these realities. 

Success Doesn’t Happen by Accident.

As we approach the next Congress, savvy public affairs professionals are preparing for the coalitions of strange bedfellows that may emerge to reach a bipartisan consensus on key legislation. Shaping the debate to advance your infrastructure initiatives means understanding the full range of stakeholders involved in policy discussions while mapping out the operating landscape to gauge potential emerging consensus. As always, Delve is here to provide the insights you need to see around the corner and anticipate any risks or opportunities.

Here’s What You Need To Know

Coronavirus has changed so much about how we live our lives – and many of those life modifications just may turn out to be permanent. Perhaps the most significant of these changes is the shift among businesses to allow more work to be done remotely. While time-honored traditions like the business lunch may return, many Americans are eager to cling to one particular aspect of the new way of working: teleworking. In fact, 6 in 10 respondents told Gallup pollsters they’d like to continue working from home after the coronavirus crisis is over.

As companies become more comfortable with allowing telework, however, they are finding a surprising reality welcoming them. While some of those surprises are pleasant, such as the increased productivity of remote workers and greater flexibility for parents balancing work with “Zoom school,” there are also unpleasant surprises as companies learn more about the confusing tangle of state and local regulations and unexpected costs awaiting them when employees can work from anywhere.

So before public affairs professionals celebrate their companies’ decision to move all operations offsite or allow employees to work remotely, here’s what you need to know to ensure the decision does not come with unexpected costs and compliance challenges thanks to regulatory regimes still largely based on a business’ physical footprint that is increasingly inapplicable to the future of work.

Covid-19 Showed Employers Productive Telework Is Possible, and Employees Want To Keep the Flexibility

The Big Shift: In 2014, just 6 percent of respondents told Gallup they worked at least 20 hours each week from home. By the time pandemic shutdowns began nationwide in mid-March 2020, 31 percent of Americans were working remotely. In the weeks that followed, that number doubled. According to Pew Research, 90 percent of those who lost jobs due to COVID-19 shutdowns worked in industries or for organizations where telework was either not permitted or impossible. For Americans able to work virtually, technology provided job security – jobs they might have otherwise lost if Internet-based tools were unavailable. For employers, the promising results of this great remote work experiment means many are thinking employees could live anywhere, reducing relocation costs and expanding the talent pool nationwide.

Now What? With a return to normal appearing slowly on the horizon, organizations are preparing for what a future with reduced in-person office presence would look like. According to CNBC, 43 percent of employees said they would like to continue teleworking permanently. Employers sensed this trend, and by late March, 74 percent of company executives interviewed by Gartner said they anticipated at least 5 percent of their company workforces would telework after the pandemic concluded.

Indeed, many organizations have already begun that transition for great numbers of their employees. Most notably, Facebook, which had once given $10,000 bonuses to team members who lived within 10 miles of their offices, says it will now permanently shift tens of thousands of its employees to remote work. Other tech companies like Google, Twitter, and Shopify have also announced making virtual collaboration from home permanent, and because the industry often sets trends for top employers across the nation, many more will likely follow suit to compete for the best talent. However, as organizations cast a wider net in their recruiting and retention strategies, picking the best candidates from far and wide, there are hidden costs and complexities that may surprise them.

Before Moving Operations Online, Organizations Should Anticipate Compliance Costs and Confusion

Postcards from Paradise: Now unbound from their offices, teleworking employees have the opportunity to pick where they live, not based on where a job may be but on where they want to be. While employees may move to the Florida Keys or atop a mountain in Montana, their mobility comes at a price to their employers. The new virtual workspace will require organizations to be familiar with the rules governing a myriad of potential residences of their employees, both current and future. Benefits like workers’ compensation, disability insurance, and unemployment insurance vary wildly from state to state. So, too, do licensure and business registration requirements, which often are not clear because they were written for a physical world of business with storefronts and official offices, not for a virtual world. Organizations will now have to look into whether or not they’re required to register in each state where an employee lives, which means that 12 employees living in 12 different states could potentially necessitate 12 different registrations, with such costs rising exponentially and unexpectedly for employers.

Even More Tax Men Come Calling: Another complication facing organizations considering virtual work options are the vastly different tax structures for different states and municipalities. Some states, like Texas and Florida, do not have state income tax. Then, there are issues with sales tax, as rates and what is taxable can differ wildly from locality to locality. These considerations include not only e-commerce transactions but also state and municipal sales taxes imposed on service-based offerings such as consulting or digital subscriptions. Still other locations have different withholding and pay stub requirements.

All of these can leave human resources and accounting departments scrambling to ensure they are constantly in compliance with thousands of different tax conditions simultaneously. When all the accounting is complete, many companies will face a shocking uptick in taxes owed and compliance costs – expenditures for which they might not have budgeted prior to a remote working shift. Indeed, many organizations choose their operating base on a location’s tax and regulatory environment. With team members scattered across the country, these considerations are no longer in the hands of corporate officers, but of employees who are moving with other considerations in mind.

Jurisdictional Confusion: A persistent concern among employers remains the correct application of rules that depend on number of employees within a firm, office location, or certain jurisdiction. For example, the Family Medical Leave Act (FMLA). Current regulations say that in order to receive qualified medical leave, an eligible employee must be “employed at a worksite where 50 or more employees are employed by the employer within 75 miles of that worksite.” This complicates matters for teleworking employees, whose employers may think that they are not covered by FMLA if they live elsewhere.

According to legal experts at Lowenstein Sandler, LLP, however, the employee’s worksite “is the office to which the employee reports and from which assignments are made,” not where the employee lives. “So, for example, the lone Massachusetts employee who works from her home, but who receives all of her work assignments from her supervisor in New York where the company employs more than 50 employees, may be eligible for FMLA leave,” Lowenstein explains, adding, “State leave laws may impose additional leave obligations upon employers.” Multiply that across various jurisdictions and a plethora of federal, state, and local work rules, which often conflict with each other, and companies shifting to remote work could face considerable legal and regulatory confusion.

Despite a Few Emerging Solutions, Policymakers Are Still Applying 20th Century Rules to 21st Century Work

Practical Solutions: In one of the country’s regions most devastated by coronavirus, business advocates have come up with solutions to navigate each state’s tax laws for employees working from home. There’s a growing movement in the tristate area of New York, New Jersey, and Connecticut to allow for reciprocity, so employees can avoid paying taxes in multiple states as they work from home for an extended period. Illinois already has a similar arrangement with nearby states, so employees working there but living in Kentucky, Michigan, Wisconsin, or Iowa may pay taxes where they live. Employees across America may soon demand the Illinois model, especially if they reside in states with low or no income tax but work in states that charge it.

20th Century Rules Meet A 21st Century Workforce: Most of the rules and regulations governing labor in the U.S. originate from 20^th century practices and standards. However, the future of work was changing even before the pandemic, and with the American workforce increasingly going virtual, compliance requirements must change, too. This leaves organizations in a tough spot: their workforce demands the kind of flexibility that working from home provides, while the laws and regulations make delivering these benefits difficult, time-consuming, and expensive. As companies try to adapt while maintaining compliance, mistakes are inevitable, leaving them exposed to reputational and legal challenges.

No More HQ2 Competitions? This shift to a more remote workforce could also add complications for states, counties, and cities, who for years have wooed businesses to their territory for the promise of tax income and jobs. Now, employees can vote with their feet, regardless of where the business chooses to locate its headquarters. This shift in power dynamics means something like the Amazon HQ2 competition may be a relic of the past.

Work from home is here to stay, and in the months ahead, we will discover just how many Americans will maintain their telework flexibility. As organizations modify their practices to accommodate this trend, they will have to navigate a compliance landscape that is more complicated than they may have realized. They will also need to consider new challenges that can arise as a result. By understanding these challenges ahead of time, leaders will be able to save themselves time, money, and headaches while creating a safe, desirable workplace that keeps current team members happy and recruits the best and brightest, too.

Here’s What You Need To Know

With work and leisure plans suspended due to coronavirus, many Americans have canceled their flights or delayed future travel. According to Transportation Safety Administration (TSA) data, the number of passengers clearing TSA at airports each day fell from 2,122,898 on March 10, 2020 to just 124,021 by April 2,2020. Conde Nast Travel estimates there was an overall 95 percent drop in flying in the U.S. by mid-April, with more than half of all planes grounded at the height of the pandemic. In May, three small airlines shut down their shuttle service, which means that fewer short distance flights are now available to consumers, even as major airlines suspended operations in key markets.

Unfortunately, as we enter what would traditionally be the summer travel season, the pain felt by airlines is just beginning. Industry experts say current hardships are merely a harbinger of what is to come. Despite significant growth leading up to the pandemic, industry representatives say they “anticipate a long and difficult road ahead.” Airlines for America points out that it took three years for the industry to recover from the 9/11 terrorist attacks and more than seven years to return to normal after the 2008 financial crisis. With an unprecedented public health crisis whose remedy remains unclear, the industry must brace for years of financial uncertainty as customers continually assess the health risks of flying.

These challenges affect not only airlines but also the airports and businesses who support them. As air traffic lags, so, too, does the recovery for these elements of the air travel sector. Here’s what public affairs professionals working in this field need to know to prepare for the unique challenges posed by the “new normal” of air travel.

As Air Travel Returns, New Health and Safety Policies Create Risk of Another Kind of Viral Moment

Consumers Remain Concerned About Virus. Even as airlines institute new policies they say will ensure the safety and well-being of their customers, consumers may not be convinced these measures are enough. According to The Wall Street Journal, 85 percent of travelers now say cleanliness in airports and on airplanes would affect their decision to travel – as high a factor as ticket price. Industry officials say this is the first time they have seen any customer consideration factor as much as cost. As coronavirus infection rates ebb and flow, so, too, will customers’ willingness to go to airports and fly on planes.

Uneven Masking Rules Create Confusion – And Potential For Clashes. For those customers who elect to fly, the uneven application of masking rules can be very frustrating, leaving some worried about their safety on-board and others angry about the new requirements. These fears are exacerbated by the diverging policies among U.S. airlines, as some require face coverings only at boarding while others mandate consistent wear throughout the flight. There are also concerns about a lack of social distancing on some flights, since airlines are canceling many of them and as a result, some airlines are packing remaining flights.

Are Airlines Ready For Their Close Up? Airlines must also develop procedures to handle customers who refuse to adhere to coronavirus guidelines. In May, American Airlines began instructing their staff to avoid escalation with passengers once they have boarded by informing them of the masking policy, rather than actually enforcing it. Conversely, American Airlines, Jet Blue, and Hawaiian Airlines have said they are prepared to ban, whether temporarily or permanently, any customer who does not adhere to the airline’s masking policy. In the midst of current social unrest, passengers-turned-documentarians are just a single viral video away from creating a real public relations nightmare for airlines. This puts pressure on airline personnel who must stand ready to pacify customers irritated with each other and with the airlines themselves while simultaneously maintaining the safety of all on-board. Outbursts that disrupt travel could create reputational challenges all too familiar to the airline industry.

Social Distancing Comes At A Cost. While some airlines have created new systems to allow space in between seats, this accommodation can come at a cost to customers. Frontier Airlines faced blowback from members of Congress as it attempted to charge passengers an extra $39 fee to sit in a row that had no middle seat, ultimately rescinding its plan after federal lawmakers intervened. Now, American Airlines says it will start flying at full capacity next week, abandoning social distancing guidelines that kept middle seats empty and more space between customers.

Federal Support Brings New Scrutiny on Worker and Consumer Protection, and Renewed Climate Demands

CARES Act Saved Airline Jobs, But For How Long? With historic losses in passengers and profits, the airline industry secured financial relief in the CARES Act, which provided airlines $25 billion in taxpayer support under the conditions that they “keep at least 90% of workers employed through September, they will return one-third of the funds they receive, suspend stock buybacks and dividends, and limit executive pay.”

However, airlines are now acknowledging that after the September 30^th deadline passes, many are planning to lay off employees. Philip Baggaley, the chief credit analyst for airlines at Standard & Poor’s, tells CNN he anticipates 95,000 to 105,000 jobs lost across the U.S. airline industry this fall. News from American Airlines supports this expectation, with the airline giant saying it will cut its management and support staff by 30 percent, or about 5,100 jobs. While these job cuts are a reality of lessened consumer and business demand for flights, it will still cause scrutiny and challenges for airlines that received taxpayer support with the expectation it would protect workers.

No Refund For Consumers Even As Taxpayers Foot The Bill. Missing from the legislation was any redress for customers whose flights had been canceled in response to the pandemic. Passengers instead have been offered vouchers with strict terms and potentially unrealistic expiration dates. So, while taxpayers foot the costs of industry relief, many have not been made whole for their canceled plans. Angst directed toward airlines for failure to return money to customers could compound frustrations towards companies that existed long before COVID-19 halted air travel – and had already spurred demands for new or expanded legislation to protect consumers.

And Don’t Forget Flight Shaming. In another source of scrutiny for the industry, during the CARES Act negotiations, some Democrats sought to force airlines to adopt more aggressive green initiatives to combat climate change. While such conditions were not ultimately included in the legislative package, climate change pressure on the industry began well before the pandemic began, and demands to enact carbon emissions offsets or reductions are likely to continue, driving up the costs for airlines and passengers when neither can afford it. Should the November elections shift party control in Washington, airlines can expect such demands to be renewed with a fervor.

Struggling Airports and Related Services Are Pushing for Their Own Relief, Even if It Means Higher Taxes for Travelers

Airport Struggles Could Lead To Tax Hikes. The pandemic has not only affected airlines, but also the airports and businesses who support them, too. According to the Airports Council International, airports worldwide are expecting a decline of more than 4.6 billion passengers, creating a $97 billion revenue loss for airports. In fact, airports have already lost nearly $40 billion in revenue. Despite receiving $10 billion in the CARES Act, airport revenue losses have already put large construction projects on hold. Because airports are typically funded through the combination of airline fees and taxes, this dramatic drop in air traffic could mean that airports may seek additional bailouts, or absent that relief, potentially seek local tax increases to recoup their losses. However, airlines are quick to point out consumers already pay nearly $7 billion annually in airport taxes, often as part of the ticket prices they pay.

Restaurant And Retail Concessions Hope To Board The Next Relief Bill. Meanwhile, airport restaurants and retailers say that the 95 percent decline in passengers in recent months have left them financially insolvent. “We’re trying to tell Congress that ‘You missed us. You totally overlooked concessionaires.’ We’re hoping and urging that they will provide relief,” Rob Wigington, executive director of the Airport Restaurant and Retail Association, said. To that end, these organizations are now asking Congress to ease the burden of just $38 million in April 2020 sales, compared to $825 million during the same time last year. The association, which represents companies employing 125,000 concession workers, says that just 5 percent of its workforce remained employed by May and that it would need $5 billion in loans and grants to stay afloat. Right now, additional coronavirus relief bills remain in flux, so industry representatives must urgently make the case they should be included.

The Airline Travel Industry Can Fly Right With an Information Advantage

While the $25 billion airline relief in coronavirus legislation was a victory for the industry, there are still many obstacles ahead. From hygiene on-board to fewer passengers in the skies and in the airports, the air travel industry must be prepared to convey their commitment to customers and their willingness to adapt to the new way of travel while navigating heightened reputational scrutiny. With competitive intelligence, public affairs professionals in the industry can anticipate and mitigate these risks while advancing the interests of their companies’ and coalitions’ efforts to keep Americans at work and in flight.