Passage of the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act by the U.S. House of Representatives on Friday looked certain to secure President Donald Trump’s signature, but how much of the funds go to each individual airline and aerospace company and under what conditions remains a matter for the Treasury Department to decide. Each company must still apply for its portion of the guaranteed loans and grants, and whether or not the government requires equity stakes as a condition of the aid might determine how it gets distributed.
Boeing CEO David Calhoun has made it clear he will not accept any such public ownership stake and insisted the company could find sufficient private funding in any event. Airline CEOs, however, might not enjoy such latitude given the dire economic situation in which their companies find themselves.
The bill, which passed the Senate unanimously and the House by voice vote, sets aside $25 billion in loans for commercial air carriers and another $25 billion in grants for employee compensation. Another $4 billion in loans and $4 billion in grants go to the country’s cargo carriers. The association representing U.S. major carriers, Airlines for America, did not immediately respond to questions about the section of the bill that allows the Treasury Secretary discretion to require warrants or ownership interests. However, it issued a statement applauding legislators for their bipartisan efforts to pass the bill in recognition of the airlines’ plight.
“Before this global emergency, U.S. airlines were transporting a record 2.5 million passengers and 58,000 tons of cargo each day,” it said. “Today, carriers are burning through cash as cancellations far outpace new bookings for U.S. carriers, planes are only 10 to 20 percent full and new bookings are showing 80 to 90 percent declines in traffic even as airlines make dramatic cuts in capacity. This week, TSA screened just 454,000 passengers on Sunday; 331,000 on Monday; 279,000 on Tuesday; 239,000 on Wednesday; and 204,000 on Thursday. This situation is getting worse each day with no end in sight.”
Boeing, meanwhile, faces challenges related to its own cash burn, even as Calhoun expressed absolute confidence in the company’s ability to support its own recovery. Theoretically, Boeing qualifies for at least some of the $500 billion in loan guarantees the legislation makes available for “distressed” companies. It also might benefit from another $17 billion set aside for companies deemed essential to national security.
Whether or not Boeing finds the conditions attached to the aid palatable, officially it supports passage of the bill as written. “We thank the Administration, especially the President and Secretary [Steven] Mnuchin, as well as Congress for working together to take swift bipartisan action to support the American economy, including the 2.5 million jobs and 17,000 suppliers that Boeing, the aerospace industry, and the U.S. rely on to maintain our world leadership in commercial, defense, and services,” it said in a statement. “The bill’s access to public and private liquidity, including loans and loan guarantees, is critical for airlines, airports, suppliers, and manufacturers to bridge to recovery.”