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.

President Trump said at a briefing that the aid would help airlines through a tough period.

Airline shares rose sharply in after-hours trading following the announcement, with United trading up 9%, American up 13% and Delta up 10%.

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.

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. Many domestic airlines are in dire need of cash to pay workers and maintain planes, as travel demand has crashed.

"While I am happy we are receiving this much-needed cash for payroll now, it adds to the significant debt we are taking on as we burn through our cash reserves," JetBlue Airways Corp. CEO Robin Hayes said in a statement. JetBlue said the $936 million it will receive as a $685 million grant and a $251 million loan would cover 76% of payroll.

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.

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 19:13 ET (23:13 GMT)

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