February 28, 2024


Delighting finance buffs

Coronavirus: US airlines receive extra $9.5 billion in payroll support amid Covid-19

The US Treasury Department said on Saturday it has released $9.5 billion in additional funds from the Payroll Support Program to US air carriers, bringing to $12.4 billion the total provided to the airline sector hit hard by the coronavirus pandemic.

In total, the government has disbursed grant funds to 10 major airlines and 83 smaller carriers.

Congress approved $25 billion in grants for payroll assistance for passenger airlines. Treasury required major airlines receiving more than $100 million in assistance to repay 30 per cent in low-interest loans over 10 years and issue warrants equal to 10 per cent of the loan amount.

Airlines must not cut pay or jobs through Sept. 30 as a condition of the grants and are barred from buying back stock or paying dividends and face restrictions on executive compensation.

SkyWest Inc Chief Executive Chip Childs told employees on Friday the airline expects to receive $438 million from Treasury in payroll assistance.

“There is still much about the future and recovery that remains uncertain, and there is a very real possibility that we could be a smaller airline by the end of the year,” he wrote in a email seen by Reuters.

The four largest US carriers are receiving $19.2 billion in total out of the $25 billion – American Airlines Group Inc, Delta Air Lines Inc, United Airlines Holdings Inc, and Southwest Airlines Co.

Treasury is awarding major carriers 50 per cent of the grant funds initially and then releasing the remainder through July.

Treasury said additional money will continue to be provided to approved applicants “on a rolling basis.”

The department is still reviewing how to award $4 billion in grants to cargo carriers and $3 billion to airport contractors such as caterers.

Cargo carriers that receive $50 million or less of payroll support and contractors that receive $37.5 million or less “will not be required to provide financial instruments as appropriate compensation” for support, the department said.

The Treasury Department also published on Saturday the application form for companies deemed critical to maintaining national security seeking loans from a $17 billion fund.

The fund has been mentioned as a potential source of funds for Boeing Co, which declined to say on Friday whether it would apply. Treasury said it wants companies to apply by May 1.

Treasury has an additional $25 billion in loans it can award to passenger airlines and $4 billion in cargo loans. Some airlines, including American, Delta and Alaska Airlines, have already applied.

Airlines may still need more money as U.S. air travel demand has fallen by 95 per cent and shows no sign of improving.

On Friday, President Donald Trump said the US government could pre-buy airplane tickets at a steep discount of 50 per cent or more for travel for the next four or five years. “You infuse them with some cash. And in the meantime, we’re flying the people of our country for … a fraction of the cost,” he said.

Airlines for America, a trade group representing major US airlines, declined to comment.

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