DAL Delta Air Lines Inc

By Alison Sider and Doug Cameron 

Several U.S. airlines on Friday applied for government funds to keep paying workers, but say they still need more cash as they face an existential crisis that doesn't look likely to abate soon.

American Airlines Group Inc., Delta Air Lines Inc., United Airlines Holdings Inc., and JetBlue Airways Corp. submitted applications for the government grants authorized under the $2 trillion stimulus package passed last week. Southwest Airlines Co. has previously said it would apply.

However, carriers cautioned on Friday that the government help won't be enough to see them through what several have described as the most serious crisis they have faced.

The carriers that applied for the grants didn't detail the terms they proposed. The Treasury Department had encouraged airlines to apply by April 3 for the best chance at securing funding quickly. It will continue accepting applications until April 27.

Demand for travel has all but evaporated as the new coronavirus has spread and governments have restricted international travel and urged people to stay home.

Delta Chief Executive Ed Bastian wrote in a message to employees Friday: "We know we still haven't seen the bottom."

Delta said it is burning through $60 million cash a day and projected the government funds would only last until June without other spending cuts. It has asked employees to take unpaid leaves and said some 30,000 have volunteered. The airline expects second-quarter revenue to be down $90 million from a year ago.

JetBlue said workers will likely see smaller paychecks as the funds, which are tied to last year's staffing levels, won't fully cover what its employees are used to earning when the airline is flying a full schedule. The airline said it is in talks with the government and private lenders.

"We are leaving no stone unturned," Chief Executive Robin Hayes told employees Friday. "The good news is this law keeps paychecks coming and it buys us time."

United said it plans to cut 80% of its capacity for this month and to make even larger capacity cuts in May. The airline estimated that it lost $100 million in revenue a day in March.

Airlines and their labor unions had lobbied for that package to include $25 billion in direct grants they could use to continue paying staff. The funds come with strings attached, including a promise not to conduct involuntary layoffs or furloughs until October.

The law also allows the government to ask for equity, stock warrants, or other financial instruments in exchange for the grants. Some carriers have been asking Treasury Secretary Steven Mnuchin to go easy on requests for equity stakes, fearing shareholder dilution, people familiar with the talks have said.

Union leaders, including heads of major flight attendant unions and three former leaders of the Air Line Pilots Association, have said the government could put jobs at risk if it insists on terms that the airlines won't accept.

The stimulus package also set aside another $25 billion for loans to passenger airlines, as well as additional funds for cargo carriers and airline contractors.

Airlines expect to continue talks with the administration about the tentative rules laid down to access the grants, which include minimum domestic flying requirements, as well as how the government would be compensated through equity, warrants or other financial instruments

Most big network carriers backed the Transportation Department's proposals issued earlier this week, though asked for more flexibility to avoid having to operate some seasonal services, according to regulatory filings.

Low-cost carriers including Allegiant Travel Co. want far more flexibility and warned the requirements could force them to fly empty planes and risked unwinding 45 years of industry deregulation.

Airlines have continued to raise bank and capital-market funding through the crisis, drawing down existing loans and increasing emergency facilities. Analysts said these would provide an important benchmark for the security sought by the Treasury as airline share prices have fallen by 80% since late February.

Airline shares have tumbled in recent weeks. American's shares closed at a record low Friday, and lost most of the gains they made since the stimulus package was announced last week.

Warren Buffett's Berkshire Hathaway sold nearly 13 million shares of Delta this week, around 18% of its holdings, according to a securities filing. Berkshire also sold over 2 million Southwest shares.

While the Transportation Department prepared to analyze potential payouts to airlines, it also told carriers on Friday to abide by existing regulations governing cash refunds to customers. It cited an increasing number of complaints that vouchers and credits being offered instead of cash for canceled flights were "not readily usable."

(END) Dow Jones Newswires

April 03, 2020 19:25 ET (23:25 GMT)

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