US Airlines and Treasury Department reach agreement for billions in aid

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A JetBlue Airways plane taxis alongside American Airlines, Delta Air Lines, and Alaska Airlines planes at Reagan National Airport (DCA) in Arlington, Va. On Monday, April 6, 2020.

Andrew Harrer | Bloomberg | Getty Images

Several U.S. airlines said on Tuesday they had struck deals with the Treasury Department for billions in government grants aimed at mitigating the blow from the coronavirus.

Airlines shares initially rallied at the news, but were trading lower on Wednesday.

The virus and tough measures to prevent it from spreading, such as stay-at-home orders, have pushed demand for air travel to its lowest level in decades. Carriers have grounded hundreds of airliners and are asking thousands of employees to take voluntary unpaid leave, in a race to cut costs, with cancellations exceeding bookings.

Airlines including American, Delta, United, Southwest, Mind, JetBlue and Alaska, called for portions of $ 25 billion in wage subsidies – the largest government assistance package ever given to airlines – that require airlines not to take time off or reduce employee pay rates until September 30. US airlines employ some 750,000 people. The grants were part of the more than $ 2 trillion coronavirus relief program, the CARES Act, which was enacted last month.

American said the Treasury Department approved $ 5.8 billion in aid – a $ 4.1 billion grant and a $ 1.7 billion low-interest loan. The Fort Worth, Texas-based carrier said it plans to apply for another government loan of around $ 4.75 billion.

“By accepting these funds, we have gladly agreed not to involuntarily lay off or reduce the hourly rates of pay for our US-based team members until September 30, when we hope and expect to. which Americans regularly fly back, ”said American CEO Doug Parker and airline president Robert Isom wrote to employees announcing their deal with the Treasury Department.

Dallas-based Southwest said it expects to receive $ 3.2 billion under the program, more than $ 2.3 billion in payroll support and a low-interest loan. over 10 years of nearly $ 1 billion. The loan will likely include 2.6 million Treasury Department warrants, and that aid prohibits share buybacks and dividends until September 30, 2021, and demands limits on executive compensation for nearly two years, the airline said.

Delta said it has reached a deal with the Treasury Department for $ 5.4 billion, including a 10-year, $ 1.6 billion unsecured loan and that the airline will give the government warrants to acquire about 1%. Delta shares at $ 23.39 per share last Friday. closing price, over five years. New York-based JetBlue said it will get $ 935.8 million, or nearly $ 251 million in the form of a loan.

“We are pleased to hear that a number of major airlines are planning to participate in the payroll support program,” the Treasury Department said in a statement. “This is an important CARES Act program that will support American workers and help preserve the strategic importance of the airline industry while allowing appropriate compensation for taxpayers.”

Other airlines plan to detail their expected share of the aid on Tuesday or later this week, people familiar with the talks said.

The talks dragged on longer than some carriers expected. The Treasury Department proposed last week that airlines repay 30 percent of the subsidies, terms that appear to have stuck, at least with American and Southwest. Lawmakers and unions opposed the terms, saying the aid package passed by Congress last month provided that the funds would be structured in the form of wage subsidies. The Treasury Department said last week that airlines seeking less than $ 100 million not having to provide this compensation for funds.

Sara Nelson, president of the Association of Flight Attendants, which represents around 50,000 cabin crew members of airlines, including United and Spirit, and had pushed lawmakers to devote some aid only to workers, said applauded the progress made in disbursing aid.

“This is an unprecedented achievement – a real worker-centric stimulus that keeps people connected to their jobs and provides stability and hope for millions of aviation workers and sets a model that we need to. now work to extend to every worker, ”she said in a statement. .

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