A $14 billion US government lifeline to the aviation industry will help cash-strapped airlines bolster liquidity, preserve jobs and prepare for an upturn in travel demand.
The latest stimulus package would be enough to see US airlines through to 2022, with American Airlines set to benefit the most, George Ferguson, senior aerospace industry analyst at Bloomberg Intelligence, said.
American Airlines, the most indebted of the US full-service carriers, will receive the most money, almost $3bn, he said.
The package will provide US airlines with an additional quarter worth of liquidity, assuming a cash burn rate at the same levels seen in the first quarter, which is the worst since the second quarter of 2020 when the pandemic hit.
"US airlines appear safe for all of 2021," Mr Ferguson said. "The extension of payroll support will bolster US airlines' liquidity and allow them to remain ready for a travel rebound, though at the likely cost of keeping fares under pressure."
The $14bn payroll assistance package to US carriers, part of a wider $1.9 trillion Covid-19 relief bill, is the third wave of government support to the sector that has been devastated by the pandemic.
The government also allocated $1bn for contractors to the carriers, extending a payroll support programme set to expire on March 31. It also includes $8bn for airports to make changes to facilities or staff to curb the spread of Covid-19.
The funds will be tied to retaining jobs at the US airlines, which will likely keep the carriers flying higher capacity than they would without the support.
"The excess capacity will keep fares depressed, especially as airlines don't need to meet the cost of labour," he said.
American Airlines and United Airlines pulled back furlough orders of nearly 27,000 employees after US Congress passed the stimulus bill last week.
US airlines were already well positioned to weather the pandemic, so the additional payroll support allows them to minimise burning their own cash.
American and JetBlue, the most-strapped carriers, would have at least five quarters of liquidity before any new stimulus aid comes through, Mr Ferguson said.
Among the best-positioned airlines, Southwest could withstand 12 quarters, Delta 10 quarters, while others such as United, Alaska and Spirit Airlines have seven to nine quarters, he said.
The stimulus package will support US carriers and "will bolster their liquidity at a time when signs of improving travel demand are emerging", Moody's Investor Services said in a report.
"We expect air travel bookings to increase in the coming months as more people get vaccinated," Moody's said. "As a result, higher ticket sales will lower daily cash burn, extending airlines' liquidity buffers."
The grant allocation for US airports will have the largest benefit for airports that are still suffering from low levels of international travel, the credit ratings agency said.
Airlines for America (A4A), an industry trade group, applauded the latest payroll support programme extension.
The programme "has been vital to preserving the jobs of the US airline industry's hardworking employees – flight attendants, pilots, mechanics, gate agents and others", A4A chief executive and president Nicholas Calio said in a statement.
The stimulus package comes as the global health crisis took an unprecedented toll on the US airline industry.
At its lowest point, passenger volumes were down 96 per cent to a level not seen before in aviation history, the A4A said.
Currently, passenger volumes remain down nearly 60 per cent, carriers are operating 40 per cent fewer flights compared to this period last year, net booked revenue is down 74 per cent and US passenger airlines are burning an estimated $150 million of cash per day, it said.
