White House, Airlines Agree to $25 Billion Bailout

Airplanes sit parked in a line, idled due to the Covid-19 coronavirus outbreak. (AP Photo/Miguel Morenatti)

(CN) — The Trump administration and major U.S. airlines reached an agreement Tuesday on a $25 billion aid package that will help companies keep employees on the payroll and ensure the industry stays afloat amid an economic downturn sparked by the coronavirus outbreak. 

The bailout package is welcome relief for a commercial airline industry that has seen air travel decrease dramatically since the outbreak of the novel coronavirus worldwide. 

The number of confirmed Covid-19 cases in the U.S. surpassed 547,000 Tuesday as the number of lives claimed by the virus reached 21,662, according to data collected by Johns Hopkins University.

Days after President Donald Trump declared a national emergency in March, lobbying groups for U.S. airlines asked the federal government for over $50 billion in financial assistance as the industry projected declining sales due to the pandemic.

Commercial airlines employ over 750,000 people in the U.S., including pilots, flight attendants, gate agents and mechanics, according to industry lobbying group Airlines for America.

In a March 16 letter to Congress, the group recommended a federal aid package including $30 billion in grants for passenger and cargo carriers, and another $25 billion in unsecured loans and tax relief.

The payroll grants would ensure airline companies wouldn’t have to furlough employees or enact dramatic reductions in their workforce through September — when airlines hope widespread air travel will resume — the lobbying group said in a March 21 letter to Congress. 

An additional $4 billion was requested for cargo air carriers and the group asked that excise taxes airlines paid into the federal Airport and Airway Trust Fund be refunded in the form of a tax rebate. 

“The current economic environment is simply not sustainable, and it is compounded by the fact that the crisis does not appear to have an end in sight,” the letter said.

Congress responded by including financial relief for U.S. commercial airlines in the Coronavirus Aid, Relief, and Economic Security (CARES) Act signed by Trump last month.

Americans for Airlines President and CEO Nicholas E. Calio said in a statement after the bill was signed that industry relief should be released without restrictions since airlines would be key to the country’s economic recovery.

“The impact of government- and business-imposed travel restrictions and public fear have devastated the U.S. airline industry, our employees, travelers and the shipping public,” Calio said in a March 27 statement. “Since the beginning of March, U.S. air carriers — both passenger and cargo — have seen their positions of strong financial health deteriorate at an unprecedented and unsustainable pace.”

The $25 billion federal aid package approved Tuesday — nearly half what airlines requested — will help participating companies pay workers while injecting liquidity into operations. 

Airline companies participating in the agreement are Alaska Airlines, Allegiant Air, American Airlines, Delta Air Lines, Frontier Airlines, Hawaiian Airlines, JetBlue Airways, United Airlines, SkyWest Airlines, and Southwest Airlines.

Industry leaders agreed to terms putting restrictions on stock dividends, stock buyback during the life of the loans and on compensation for company executives. 

A spokesperson for the industry lobbying group did not immediately respond to a request for comment on the aid package. 

U.S. Treasury Secretary Steven T. Mnuchin said in a statement Tuesday that conversations to include additional airlines in the agreement, called the Payroll Support Program, are ongoing.

“This is an important CARES Act program that will support American workers and help preserve the strategic importance of the airline industry while allowing for appropriate compensation to the taxpayers,” Mnuchin said. “We look forward to working with the airlines to finalize the necessary agreements and disburse funds as quickly as possible.”

Mnuchin said the program will soon include smaller passenger air carriers and that cargo carriers and contractors will also receive guidance on participation. 

American Airlines said in a statement it will receive $5.8 billion in payroll assistance under the agreement, which will be split into a $4.1 billion grant and a $1.7 billion loan.

The airline plans to apply separately for a loan from the U.S. Treasury for approximately $4.75 billion.

American Airlines Chairman and CEO Doug Parker said in a statement the aid package will help keep struggling employees on the company payroll during the pandemic.

“The support our government has entrusted to us carries immense responsibility and an obligation that American Airlines is privileged to undertake,” Parker said. “We recognize the importance of our service as evidenced by the customers who continue to fly today for important reasons, including medical professionals getting to where they are most needed and family members getting to where they feel most safe. It is our privilege to continue flying through the downturn and to be in a ready position as our country and the world return to the skies.”

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