U.S. Airlines Reach Coronavirus Aid Agreements

A growing number of U.S. airlines have reached agreements with the U.S. Department of the Treasury this week for aid packages under the Coronavirus Aid, Relief, and Economic Security (CARES) Act Payroll Support Program (PSP). According to U.S. Treasury Secretary Steven Mnuchin, airlines planning to participate in the program currently include Alaska Airlines, Allegiant Air, American Airlines, Delta Air Lines, Frontier Airlines, Hawaiian Airlines, JetBlue Airways, United Airlines, SkyWest Airlines and Southwest Airlines. Mnuchin added that his department is “working to review and approve applications for smaller passenger air carriers as quickly as possible and will provide further guidance for cargo carriers and contractors very soon.”

Southwest’s PSP agreement covers $2.3 billion in direct payroll support and a nearly $1 billion unsecured term loan. The company said the loan is “expected to include approximately 2.6 million warrants issued to the U.S. Department of Treasury.” United Airlines announced on Wednesday that it expects to receive approximately $5.0 billion from the federal government, about $3.5 billion of which will be a direct grant with the remaining $1.5 being a low interest rate loan. United said its parent company “expects to issue warrants to purchase approximately 4.6 million shares of UAL common stock to the federal government.”

Delta will be getting $5.4 billion through the program including a $1.6 billion loan. The airline said it will be providing the government with warrants to acquire about 1 percent of Delta stock at $24.39 per share over five years. American Airlines announced approval for $5.8 billion in financial assistance via a $4.1 billion direct grant an $1.7 billion loan. American is also seeking a separate $4.75 billion from the Treasury Department.

As previously reported by AVweb, CARES Act participants cannot conduct involuntary furloughs or reduce employee pay rates and benefits until Sep. 30, 2020, or “pay dividends, or make other capital distributions, with respect to the common stock” of the company through Sep. 30, 2021. The bill (PDF) further stipulates that the funds may only be used for employee wages, salaries and benefits. Under the CARES Act, the Secretary of the Treasury may receive “warrants, options, preferred stock, debt securities, notes, or other financial instruments issued by recipients of financial assistance” to guarantee government loans.