U.S. Treasury Reaches Loan Agreements With Five Major Airlines -- Update
By Alison Sider and Kate Davidson
The U.S. Treasury Department has agreed to terms for loans to
American Airlines Group Inc. and four smaller airlines as part of
an aid program to help the industry weather the coronavirus
The Treasury said that in addition to American, Frontier
Airlines, Hawaiian Airlines, SkyWest Airlines and Spirit Airlines
Inc. had agreed to loan terms and signed letters of intent.
Air travel fell sharply this spring as government restrictions
on travel and fears of infection kept passengers from flying. While
air travel has started to rise, demand remains a fraction of what
it was a year ago and airline executives have said they expect a
full recovery will likely take years.
These are the first airlines to accept government loans from a
$25 billion pool Congress earmarked under the Cares Act, the $2.2
trillion economic stimulus package passed in March. Major carriers
have also received another $25 billion in federal aid to pay
workers through the end of September to avoid mass layoffs they
said would have been inevitable otherwise.
American expects to complete the $4.75 billion loan in the third
quarter, Chief Executive Doug Parker and President Robert Isom
wrote in a letter to employees Thursday. The airline has previously
said it was seeking to pledge its frequent-flier program as
Even with the infusion of government funds, airlines face a dire
outlook. American is burning through $35 million in cash per day,
Mr. Parker and Mr. Isom wrote, and likely has more than 20,000 more
employees than it needs to operate the shrunken schedule it
anticipates this fall.
"To be clear, this doesn't mean 20,000 of our team members will
be furloughed in October, it simply means we still have work to do
to right-size our team for the airline we will operate," the
Airlines have been scrambling to raise as much cash as they can
as travel bookings have fallen sharply, and American executives
have said that the government loans were likely the most efficient
form of financing available. The airline last week raised another
$4.5 billion to bolster liquidity, including $2.5 billion in senior
notes at an interest rate of 11.75%.
Other carriers such as Delta Air Lines Inc., United Airlines
Holdings Inc. and Southwest Airlines Co. have previously said
they've applied for government loans but hadn't decided whether to
tap them. Airlines have through the end of September to draw the
The Treasury didn't detail the amounts of the loans or the
terms, but said the borrowers would have to provide warrants,
equity stakes, or senior debt instruments. The Treasury said it is
continuing discussions with other carriers that are eligible for
Write to Alison Sider at firstname.lastname@example.org and Kate Davidson
(END) Dow Jones Newswires
July 02, 2020 10:46 ET (14:46 GMT)
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