After weeks of negotiations over the shape of the Treasury's bailout package of US airline carriers, moments ago the Treasury Department announced it had reached an agreement in principle with the country's airline to access billions of dollars in aid as the government attempts to shore up one of the industries hardest hit by the coronavirus pandemic, various sources reported.
As part of the deal all major US carriers including Alaska Airlines, Allegiant Air, American Airlines, Delta, Frontier, Hawaiian, JetBlue, United, SkyWest and Southwest will participate in the payroll support program, providing fresh hope that the US airline sector will survive despite several recent stock sales by Warren Buffett which were seen as a nail in the coffin of the sector.
The airlines applied for portions of $25 billion in payroll grants that require airlines not to furlough or cut the pay rates of any employees through Sept. 30. The grants were part of the more than $2 trillion coronavirus relief package Congress passed last month.
"We welcome the news that a number of major airlines intend 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 for appropriate compensation to the taxpayers."
Airlines are expected to provide detail on the aid as early as Tuesday, two of the people familiar with the discussions said, with Bloomberg starting to leak some of the details already such as American Airlines:
- AMERICAN AIR TO GET $4.1B DIRECT SUPPORT, $1.7B LOAN
- AMERICAN AIR: PSP PROTECTS FROM FURLOUGHS, PAY CUTS THRU 9/30
- AMERICAN AIR AGREED TO LIMITS ON BUYBACKS, DIVS, EXEC PAY
- AMERICAN AIR: U.S. AID ENOUGH TO HELP `WITHSTAND THIS CRISIS'
- AMERICAN AIR TO CONTINUE `AGGRESSIVE SELF-HELP' COST MEASURES
- AMERICAN AIR PARING BACK FLIGHT SCHEDULE FOR JUNE AND BEYOND
- AMERICAN AIR: 32,000 WORKERS CHOSE TO RETIRE, TAKE LEAVE
As noted above, the grants will come with additional conditions, most likely in the form of limits on buybacks, dividends and further layoffs. The Treasury Department has asked airlines to pay back 30% of the grants, essentially turning a portion of them into low-interest loans. Lawmakers and labor unions objected to those terms, saying the aid package Congress passed last month intended that the funds would not be structured as loans.
The aid represents a temporary lifeline for airlines after the outbreak and government travel restrictions erased all but 5% of daily passenger demand in the U.S. Forced in some cases to pay more in refunds than they were taking in from new ticket sales and fees, carriers have cut capacity as much as 80% and parked thousands of planes in the industry’s worst-ever disruption.
Shares of American Airlines Group Inc., United Airlines Holdings Inc., Delta Air Lines Inc. and Southwest AirCo. all rose on the news in extended trading.