Playbook Reporter Anna Palmer: Welcome to Playbook. I’m joined by my colleague and Playbook co-author Jake Sherman to host a virtual Playbook interview with Transportation Secretary Elaine Chao to talk about her role in the recovery, how she’s handling the safety for herself and the agency, the future of airlines and her outlook on a larger infrastructure package.
Playbook Reporter Jake Sherman: Today’s briefing is continuing the Playbook Series, “Inside the Recovery,” which will bring viewers behind the scenes as we talk with top leaders inside Congress, the White House, business executives, and political operatives, about how they are navigating the new world order and putting forth ideas to help America course correct ahead of the 2020 presidential election. Just a reminder if you have questions for Secretary Chao, you can tweet Politico Live with the hashtag #askPOLITICO, and we will get to some audience questions before we wrap up the conversation.
Anna: Secretary Chao, thank you so much for joining us. We really appreciate it.
Secretary Chao: Not at all. Thank you for having me.
Anna: Americans are still reeling from the police killing of George Floyd and citizens continue to protest in cities across the country. Republican lawmakers have largely not wanted to talk about or supported the president’s use of force outside of the White House to clear the area so the president could take a photo outside of St. [John’s] church. As a member of the cabinet, I just wanted to get your opinion. Do you think that’s appropriate?
Secretary Chao: This is a real tragedy that’s facing our nation, and we are divided in so many different ways, but violence is not the answer. The looters and the rioters do violence to the memory of George Floyd. What we need to do is to come together as a people, have legitimate dialogues about racial differences, and more than anything else, we need to get back to normalcy. We need to restore the economic vitality of this country and of this economy. Because under the vitality of this economy which existed prior to the pandemic, the health care crisis, African Americans, Hispanic Americans, Asian Americans were actually seeing the best economic times in recent memory. So, we need to lift up prosperity and the standard of living for everyone regardless of their backgrounds. We need to reopen the economy, do it safely, and restore economic vitality once again to our country.
Anna: I just want to follow up on what you were saying there. What do you think the administration needs to do to help unify and bring the country together? Is there anything the president or the Cabinet can do?
Secretary Chao: I think we are all very much focused on the whole of government response to the COVID-19 health crisis. That is the major focus facing the country. Obviously, what has happened to Mr. Lloyd, and our hearts go out to his family, it’s a tragedy. But need to restore, and it’s not conflicting, we need to restore economic vitality and prosperity to our country. Because that I think is also fueling a lot of the concerns between the racial divides.
Jake: Let’s shift gears a little bit. We’re having this discussion as part of our “Inside the Recovery” series. I’ll set the wallpaper here and say I’m a big aviation geek so I have a professional and a personal interest here. Fewer planes are in the air, cars on the road, trains on tracks, I’m wondering about the biggest dynamics – how your role has changed personally and the Transportation Department’s shift in the last 9-12 weeks as this pandemic has taken hold?
Secretary Chao: Well, our first priority in the aftermath of the declaration of the national emergency by the president on March 13 was to maintain the supply chain. We had a responsibility and were very focused on keeping our transportation system operational and safe. That meant keeping the national air space open, allowing the rest of the transportation sector to supply our economy and our country. While most of us were sheltering in place, there were brave truckers and others working in the transportation sector who were ensuring transportation supplies were delivered, that emergency medical equipment and supplies got to where they needed to be.
I want to give a big shout out to the truckers of this country because they kept the supply chains open and allowed the rest of us to stay at home safely and relatively speaking, comfortably. Seventy percent of freight is carried on trucks, so truckers have done a great job, as have the workers in the railroad sector which carry the remaining 30 percent.
We need to keep the air space open. Air traffic controllers also deserve an incredible shout out. They worked in small, confined spaces. One of our concerns was not to have any disruptions to the national air space, even as air traffic plummeted by more than 70 percent and air passenger volume dropped by more the 96 percent.
Anna: Can you talk a bit about your involvement in the development of the CARES Act, which ultimately did include $61 billion for the airline industry, which was severely impacted, as you mentioned? What were your priorities in that package?
Secretary Chao: Workers in the transportation sector. We were very concerned about maintaining payroll and ensuring people were not laid off. As you know I was the former Secretary of Labor, and I have never seen labor statistics like this. We have 40 million Americans who are out of work. That is an incredible number. It doesn’t rival the Great Depression’s ratio. We had a 25 percent unemployment rate in the Great Depression. Our workforce is now so much bigger, but in terms of absolute numbers, these are historic, unprecedented, staggering, devastation to our workforce.
In working on the CARES Act, the Department of Transportation got about $25 billion for the transit workers, the transit systems, $10 billion for airports, $one billion for Amtrak, and $50 billion went through the Treasury Department to the airline industry which comprises about 257 airlines, six of which are major. This $50 billion also went to travel agents and also went to contractors who supplied ground support at airports for the airlines. So, we were able to get out the transit dollars, $25 billion, in about six days; seven days was the statutory limit. We were able to get out the airports’ funding, as well as Amtrak, all within the legislative mandated deadlines. They were very, very short timeframes. Ninety percent of all these funds went for payroll. We wanted to maintain operations for Amtrak, for the transit agencies, for airports, and also for airline companies so that they are able to come back and help in the recovery phase of the economy when we do come back. That was important.
A lot of the money was available to be used for cleaning materials, equipment, supplies, whatever, and there were relatively fewer restrictions on this money to give greater flexibilities to the recipients so that they could meet the crisis as they saw it in their local areas.
Anna: Do you think Congress needs to provide more aid to airlines so they can avoid layoffs later in the year?
Secretary Chao: Well, let’s see what happens to the $2.2 trillion in the CARES Act that was given and signed by the president on March 27th. Right now, in terms of the airports, we have given out the monies, we have not yet seen drawdown. So, for transit companies, for example, we have seen about 50 percent allocations, and then the drawdown has been less than 50 percent. A lot of this money has been allocated, they’ve been given out, but the drawdown has not occurred. A part of it could be that the recipients are shorthanded, it’s still chaotic, but let’s see what happens when most of the money has gotten out. I think for most entities the crisis point, the time they will be rethinking about the need for additional cash, will not come about until September or October.
Jake: So, the big question in the industry and on Wall Street is will all the airlines emerge in tact from this crisis? I’m sure you’ve heard from CEOs.
Secretary Chao: I certainly hope so. Let’s make it very clear: a weakened airline industry is not good for America. This is an essential service. It is used by people even during this crisis for essential personnel, for example, to fly from one part of the country to another. Or for people who need to make trips cross country, personal tragedies, for example. These airlines flew with 4 percent load factor. On one Friday afternoon, one airline flew 151 flights out of DCA, National Airport, and 50 percent had one passenger. This is an essential service to our country so we need to keep the airlines strong and vibrant. It is not good for anyone when there is a weak airline industry.
Jake: This is a two-part question. There have been some complaints. I think it’s fair to say that the airlines are figuring out how to exist safely in the COVID era, masks, whether flight attendants wear masks, etc. What should we expect from the airlines going forward? What should be the standard at least in the immediate? What should be the standard level of care, I guess is the best way to say it, for airlines in the next, say six months to a year?
Secretary Chao: I’ve spoken with the CEOs, as have other members of the Cabinet, of these airline companies. They understand very well the predicament they are in. They understand that the passengers are future customers as well. They are concerned about providing service that will be safe because they realize that they cannot recover without public trust. They are trying their best in a difficult financial situation to maintain operations and safety.
There are some workplace issues, which are much more labor management issues, so I think it is appropriate for the airlines to talk to their labor force and come to neutrally satisfactory answers. For example, one is the face coverings. It was originally suggested that the federal government mandate the use of masks. Management and labor talked it over, and they mutually agreed that passengers should all wear face coverings, as well as the flight crew. There are issues like this that I think it is better to be resolved between parties of mutual concern. Because when the Federal Government gets involved, we tend to be much more heavy-handed, we tend to be inflexible, and once we put a rule in place, it takes a long time to remove that rule if the conditions changes. It’s much better if the labor management considerations were agreed upon themselves. We will monitor that, as we are, for example, with refunds.
We have taken a strong position on consumer refunds, passenger refunds, because the law provides that if the airline cancels a ticket, then they have to immediately and promptly refund, but what happens if the passenger cancels the ticket? Understandably so, many passengers couldn’t go on the vacation they were planning because they had been mandated by their state or localities to shelter in place, so they can’t leave their house. Or, if they were able to, Disneyland, just as an example, that they wanted to go to, shut down so there’s no place for them to go. So, they canceled the flight, and the law is unclear as to what kind of refunds need to be provided if the passenger cancels. We issued two enforcement notices clarifying what the obligation of the airlines are under both situations, and also what the rights of the passengers are because we believe in empowering passengers with information. When they are empowered, they will know better how to address their own particular situation.
We have asked, and I have spoken personally with the CEOs of the airline companies, who again understand that these are their future customers, and they need to be much more understanding. So, what we have said is that we clarified terms – such as what is prompt, what is a refund, what do they need to do – but then on top of that we asked them to be flexible and to resolve cases on a much quicker basis. We receive ordinally, on a monthly basis, about 1,300 complaints. In April, we received well over 20,000 complaints. So, we have ramped up our public communications to let passengers know, again, what their rights are, what resources are available, where they can go to find information. We have held over 1,100 public outreach and communication efforts, and we have reached over 80,000 people. Not on refunds alone, but on all sorts of other issues.
So, for trucking for example, we helped truckers in a number of ways. I don’t know if you want me to go into that or not.
Anna: We are quickly running out of time so I think we are going to shift gears just a little bit.
Secretary Chao: Let me talk about truckers. With truckers, we worked with State departments of transportation to open up State rest areas. They were closed. And then when they were closed and were opened, the food part of the State rest areas were not open. So, we gave regulatory waivers to allow food trucks to come to the State rest areas. We gave lots of commonsensical regulatory relief to truckers.
For example, they are supposed to renew expiring licenses. Well, obviously, when DMVs are closed throughout the country, they can’t get renewals, so we gave a waiver until June 30. Training waivers, they needed to have retraining every three years or so, and some of them fell between this area. Again, commonsensical waivers that would allow truckers to be flexible and be able to deliver the necessary goods. I wanted to get that in for the truckers because they have been just real American heroes throughout this whole period, supporting the rest of the country.
Anna: I appreciate that. I think one of the big questions is that the White House and Congress are starting to really work on the next coronavirus package. I’m wondering if you think infrastructure needs to be part of that, or if it’s too expensive? And then, separately, if you have any hope that there could be just a separate infrastructure package before the end of the year?
Secretary Chao: Well the administration sent our infrastructure proposal on Feb. 12 of 2018. We believe very firmly that infrastructure should be a bipartisan effort. As we go forward, we will continue to talk about the need to invest in our infrastructure, and we do invest, but we need more money. Every year, this Department alone gives about $70 billion to States for various infrastructure projects. Because of the CARES Act, which gave us about $36 billion more, our budget is about $126 billion, and that goes primarily toward infrastructure. But obviously, we need a coordinated, long-term plan to address the infrastructure needs of our country.
We have reauthorization coming up, of the FAST Act, coming up on September 30, so that is another vehicle in which we could address infrastructure. We don’t want to have shovel-ready projects only because that is not necessarily a strategic long-term view about how to invest. Roads may be repaved, but that road may not be necessary. We should be thinking longer term, on a ten-year basis, for example, so that we can address truly the long-term infrastructure needs and the competitiveness, productivity aspects of our economy.
Jake: This is a two-part question from the audience, and we are nearing the end – I think we are close to out of time. Two-part question is:
- Is travel safe? Is Amtrak safe is flying safe?
- Has the pandemic forced some long-term changes in travel? DO you believe that flying will go down permanently and driving will go up? Should we expect long-term implications here from the pandemic?
Secretary Chao: I think public trust is absolutely essential to restoring our travel plans. I do believe it is safe to travel, but we need to do what the public health officials tell us, which is we need to wear face coverings, we need to social distance where we can. Even with airlines these days, passenger volume is only up about 10%. We are at 1/10 passenger volume of last year. We need to take care of ourselves: put face coverings on, social distance, wash our hands, sanitize the area around us.
I can say that airlines, Amtrak, passenger rail, transit agencies are amping up quite a bit. There are deep-cleansing sanitizing protocols for all of their equipment. Transit agencies in particular are most in question because they have the greatest density. They’re now sometimes cleaning in public, they are boarding passengers through the back, they have plastic dividers between the drivers and the passengers, passengers themselves are spaced out, more of these agencies are putting out additional equipment so that social distancing can occur.
I’m pleased to say that the Acela between Washington and Boston has restarted service as of June 1. We all need to be careful as we go into the transportation systems in which there is greater density. Take the appropriate steps, but have comfort also in knowing that the transportation modes are deep cleaning their equipment, sanitizing their equipment, and doing so on a more frequent basis.
I’m hopeful that as we come back that this will all return to normal within a short period of time. Now what is going to happen is road travel will increase first. People will feel more comfortable getting into their cars rather than the transit, for example. So, we will see increased traffic on the roads and highways first of all. And then as people build up confidence, as we get a better feel and understanding as to what is happening with this health care crisis, the other modes of transportation will be coming back, even as they add more capacity to allow great social distancing.
I think what is going to happen is that we will see trends develop in telework. So, the immediate impact is not so much transportation, it’s architecture and real estate. Do we really need a building for 5,500 people, which is what the headquarters at the Department of Transportation, or headquarters at the Department of Labor, can provide, when more and more people are feeling more comfortable teleworking. More of us are now more comfortable in video conferencing. We now have so many options, so I think that’s actually going to change a great deal – our interaction with each other at the work place.
Anna: Secretary Chao, thank you so much for spending time with us this morning. We appreciate it. And a big thank you to our audience for joining as well. We will be back next week with another Playbook virtual briefing as part of our “Inside the Recovery” series.
Jake: If you don’t get Playbook, text PP to 66866. Thank you again Secretary Chao, and have a good rest of your week.
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