Abu Dhabi, UAEWednesday 2 December 2020

CORONAVIRUS

US airline relief plan sees biggest companies repaying coronavirus aid grants

The more than $2tn federal stimulus package includes $25bn of payroll grants for airlines, $4bn for cargo haulers and $3bn for airline contractors among other allocated funds

An American Airlines banner hangs at John F. Kennedy International Airport in New York. The travel industry has been hammered by the coronavirus pandemic and kept people home. The US government has allocated about $60bn in aid to airlines from its $2tn relief package. Bloomberg
An American Airlines banner hangs at John F. Kennedy International Airport in New York. The travel industry has been hammered by the coronavirus pandemic and kept people home. The US government has allocated about $60bn in aid to airlines from its $2tn relief package. Bloomberg

The Trump administration wants the 12 largest US airlines to repay a portion of the federal grants they receive to cover their payrolls during the coronavirus crisis.

The large carriers, which are set to receive more than $100 million (Dh367m) in payroll assistance, are being offered aid packages that would require them to repay 30 per cent of the grants through low-interest loans due within five years, two people familiar with the offers said.

Treasury Secretary Steven Mnuchin began making calls to airlines with the terms on Friday after a flurry of lobbying to speed the process of disbursing money from the $2 trillion virus aid legislation finalised on March 27. The people asked not to be named to discuss the offers that haven’t been made public.

Airlines receiving $100m or less in payroll assistance from the government won’t need to provide a financial stake or pay compensation, the Treasury Department said Friday evening as it began sending offers to the beleaguered carriers.

“This determination will provide significant support to workers and businesses across the country, while also appropriately compensating taxpayers,” Mr Mnuchin said in a statement.

The agency said it had received 230 applications for aid from passenger carriers. It is working with 12 that would get more than $100m and is discussing what sort of financial instruments it will require in return.

Katherine Estep, a spokeswoman for Airlines for America, a trade group representing most of the large airlines, said in a statement late Friday night that “We believe the law indicated that the Direct Payroll Assistance funding was to be only in grants – which is considerably more effective for our employees – and not a combination of grants and loans.”

Democrats in Congress have complained about a requirement for a financial stake or a reimbursement, saying the payroll grants were intended to keep workers employed. A separate pool of $25 billion in loans was also included in the legislation.

The decision by the Treasury to exempt smaller carriers marks a victory for the littlest ones, but the head of the Regional Airline Association, Faye Malarkey Black, on Friday night urged the department to be flexible with some of the struggling regional carriers as well.

The decision was praised by the National Air Transportation Association, which represents some of the smaller carriers.

“The staff at Treasury has been truly exceptional in terms of their accessibility and receptiveness to our questions and concerns,” said Jonathon Freye, the group’s spokesman.

The Trump administration has quickened the pace of distributing the aid amid complaints that the process was moving too slowly as airlines -- which are flying only 5 per cent of their usual load -- bled cash.

Representatives of United Airlines and American Airlines said they had received proposed grant packages from the Treasury Department on Friday, without providing specifics.

“We can confirm we heard back from the Treasury Department regarding the application we submitted for government support, and we are currently reviewing the details of their proposal,” said Frank Benenati, a spokesman for United.

At least one other carrier also received a plan Friday, people familiar with the matter said.

President Donald Trump said he’ll meet this weekend with airline executives as offers of aid started going out to carriers.

“We have a great plan for the airlines -- got to keep the airlines going,” Mr Trump said Friday during a White House news briefing.

The more than $2tn federal stimulus package includes payroll grants of $25bn for passenger airlines, $4bn for cargo haulers and $3bn for airline contractors, plus another $29bn in loans for passenger and cargo carriers and $10bn in grants to airports.

The primary concern for large and small airlines has been getting access to the grants quickly to cover salaries and benefits. Under the law, airlines that get such grants must promise not to lay off workers through September 30.

Passenger carriers paid their employees more than $30bn last year during a six-month period that the government is using to help determine the amount of the aid for each airline.

The $25bn set aside for that purpose won’t cover all of the wages and benefits that airline employees earned a year ago. But most pilots and flight attendants are paid by the hour and should see a reduction in what they are paid through September even if they aren’t laid off.

Airlines are allowed to make significant cuts in their operations even though the government is requiring a minimum number of flights to cities they serve.

The six major airlines -- United, American, Southwest Airlines, Delta Air Lines, JetBlue Airways and Alaska Air -- paid employees $27bn in salary and benefits, according to US Bureau of Transportation Statistics data.

The bureau gathers data from any carrier with revenues of $20m or more, so the smallest operators aren’t included in the totals.

The wages and benefits at the major airlines is nearly 90 per cent of the total paid by all passenger carriers, indicating they are likely to get the lion’s share of government aid.

The recent steady and sustained drop in US commercial airline travel has seen passenger numbers fall 95 per cent below levels a year ago -- an outcome that hasn’t been seen since the dawn of the jet age in the early 1960s.

Updated: April 11, 2020 09:55 AM

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