Ten U.S. carriers have agreed in principle to participate in the Treasury Department’s Payroll Support Program, part of the Coronavirus Aid, Relief and Economic Security (CARES) Act that allows for a mix of grants and guaranteed loans to the country’s airlines in return for agreements to maintain staffing and pay rates, U.S. Treasury Secretary Steven Mnuchin confirmed on Tuesday.
Mnuchin named Alaska Airlines, Allegiant Air, American Airlines, Delta Air Lines, Frontier Airlines, Hawaiian Airlines, JetBlue Airways, United Airlines, SkyWest Airlines, and Southwest Airlines as participants while adding that negotiations continue with others, including smaller regional airlines and cargo carriers.
Trade group Airlines for America (A4A) welcomed the development with a ringing endorsement of the Trump Administration's efforts. “This funding will allow those 750,000 men and women to stay on airline payrolls through September 30, 2020, and out of the unemployment lines, which is critically important at a time when we already have seen multiple weeks of historically high unemployment claims," it said in a written statement.
Among the program’s biggest beneficiaries, American Airlines said it has accepted a $4.1 billion direct grant and a low-interest loan worth $1.7 billion. The Dallas-based airline added it would apply for a separate $4.75 billion loan from the Treasury Department. Along with agreeing to freeze furloughs and any pay rate reductions through September 30, the airline said it has agreed to limitations on stock buybacks, dividends, and executive compensation.
For its part, New York-based JetBlue Airways will take $685.1 million in direct support and a $257.1 million loan. In a statement, the airline explained that the funds cover the second and third quarters of the year and equate to 76 percent of its $1.23 billion payroll from the same period a year earlier.
Under the terms of the program, airlines accepting loans will need to start repaying them in October. The U.S. government will also receive a limited number of warrants, or the right to buy shares in the participating airlines at a pre-determined price. Meanwhile, the airlines must maintain a minimum level of domestic air service in exchange for the funds.
“While I am happy we are receiving this much-needed cash for payroll now, it adds to the significant debt we are taking on as we burn through our cash reserves,” said JetBlue CEO Robin Hayes. “Thankfully, we entered this crisis with one of the stronger balance sheets in the industry, but we will come out of this with significant debt to pay down.
“With flights below 150 daily and our aircraft now only about 10 percent full, we will have far less work and fewer hours for every salaried and hourly crewmember. I know this adds financial stress at a time when we are also worried about each other’s health and safety, but I am thankful we are in a position to provide some level of pay for everyone using the payroll support funds.”