THE US Treasury Department said on Tuesday that major passenger airlines have agreed in principle to a US$25 bil (RM108 bil) rescue package, ensuring airline workers have jobs until October while the industry battles its biggest-ever crisis.
Airlines are hopeful that US passenger traffic, which has dropped by 95% due to the coronavirus pandemic, will begin to recover by October but have warned that the slowdown in air travel could extend into next year and even longer. It’s possible they will need another round of government bailouts to survive.
Major carriers will receive 70% of the funds for payroll in cash assistance that will not need to be paid back, while smaller carriers receiving US$100 mil or less will not need to repay any funds.
The six largest US airlines – American Airlines Group Inc, United Airlines Holdings Inc, Delta Air Lines Inc, Southwest Airlines Co, JetBlue Airways Corp and Alaska Airlines – as well as four other airlines accepted the support, Treasury said.
Agreements should be finalised soon and funds disbursed quickly, it said.
Carriers were told they could apply for the total salaries and benefits paid in the second and third quarters of 2019, an amount that surpasses American Airlines’ current market value.
Under the terms laid out by Treasury officials last week, the government would receive repayment on 30% of the funds awarded to large carriers and warrants equal to 10% of the loan amount that were priced at last week’s close.
Delta said it will receive US$5.4 bil in grants, of which US$1.6 bil will be an unsecured 10-year low-interest loan that has to be repaid, and will provide the government with warrants to acquire about 1% of Delta stock at US$24.39 per share over five years.
American Airlines said it would receive US$5.8 bil in grants, of which it would need to repay US$1.7 bil.
Southwest said it had agreed in principle and expects to receive US$3.2 bil in grants and will have to repay nearly US$1 bil over 10 years. Southwest will issue 2.6 million warrants to the Treasury.
JetBlue said it will receive US$935.8 mil in payroll grants. Alaska and its regional carrier Horizon Air will receive US$992 mil in funding, including US$267 mil in the form of a loan, that the airline expects will cover about 70% of budgeted costs through Sept 30.
Alaska said the Treasury will receive the right to buy 847,000 non-voting shares of parent Alaska Air Group at a price of US$31.61 per share.
United was eligible for about US$6 bil but did not disclose on Tuesday how much it would receive.
Spirit Airlines Inc, a low-cost carrier which was not listed by the Treasury as reaching agreement, said it expects “to agree on terms soon” for payroll grants. – April 15, 2020, Reuters
