Treasury, Airlines Reach Agreement on Aid -- Update
April 14 2020 - 7:04PM
Dow Jones News
By Alison Sider and Kate Davidson
WASHINGTON -- The biggest U.S. airlines reached an agreement in
principle with the federal government on financial assistance aimed
at preventing layoffs in an industry hit hard by the coronavirus
pandemic.
The Treasury Department said Tuesday that 10 of the 12 largest
airlines have told the government they intend to accept assistance
from the $2.2 trillion economic relief package passed last
month.
The biggest domestic airlines -- United Airlines Holdings Inc.,
Delta Air Lines Inc., American Airlines Group Inc. and Southwest
Airlines Co. -- all agreed to receive aid. Treasury Secretary
Steven Mnuchin said that conversations continue with some other
airlines and that officials were also working on guidance for aid
to cargo carriers and contractors.
"We look forward to working with the airlines to finalize the
necessary agreements and disburse funds as quickly as possible," he
said in a statement.
Demand for air travel has all but evaporated over the past few
months, as countries around the world imposed restrictions to try
to slow the virus's spread. Airlines have slashed flying by upward
of 70% and say many flights are still nearly empty.
The Treasury's assistance includes $25 billion in direct aid to
allow passenger airlines to continue paying salaries and benefits
to employees in the coming months. The payroll assistance "will
support American workers and help preserve the strategic importance
of the airline industry while allowing for appropriate compensation
to the taxpayers," Mr. Mnuchin said in a statement.
JetBlue Airways Corp., Alaska Airlines, Frontier Airlines,
Allegiant Air, Hawaiian Airlines and SkyWest Airlines also agreed
to accept that aid, the Treasury said.
Spirit Airlines Inc., a big discount carrier that wasn't listed
in the announcement, said it expects to agree on terms with the
Treasury soon. Republic Airways, which operates flights for major
airlines, said it is also still in discussions with the
Treasury.
Airline executives spent this past weekend in discussions with
federal officials. On Friday Mr. Mnuchin told the largest carriers
that 30% of the assistance would need to be repaid and that
airlines would have to offer stock warrants on a portion of those
funds.
Airline industry officials had believed the money would come as
grants that wouldn't need to be paid back. The government hadn't
been willing to significantly alter terms, including some repayment
to taxpayers, officials and others familiar with the talks have
said.
Details that some airlines provided on Tuesday hewed to the
terms that federal officials outlined last week.
American Airlines said it would receive $5.8 billion under the
program: $4.1 billion as a direct grant and $1.7 billion as a
low-interest loan. The airline said it would separately apply for a
$4.75 billion loan from the Treasury under another loan program for
airlines established by the stimulus.
"We now believe we have the financial resources necessary to
help us withstand this crisis and be in position to serve the
traveling public when they are ready to start flying again,"
American Airlines Chief Executive Doug Parker and President Robert
Isom wrote in a letter to employees.
Southwest said it expects to receive over $3.2 billion through
the program, including $1 billion as an unsecured 10-year loan at
low interest rates. The airline said the loan includes 2.6 million
warrants, which the government can convert to stock for a fixed
price.
"We applaud the quick action by the U.S. Department of Treasury
to infuse liquidity into the economy and try to keep businesses
open and people on the job," Southwest CEO Gary Kelly said in a
statement.
Other airlines didn't immediately provide details of the aid
they expected to receive.
Carriers had said without government help they would have to
make significant reductions to their staffs, but accepting the
money means airlines won't be allowed to lay off or furlough
workers involuntarily until October.
Write to Alison Sider at alison.sider@wsj.com and Kate Davidson
at kate.davidson@wsj.com
(END) Dow Jones Newswires
April 14, 2020 18:49 ET (22:49 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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