Coronavirus rescue package includes cash for airlines

U.S. passenger airlines are to get $25 billion in grants and
as much as $25 billion in government-backed loans under the estimated $2
trillion stimulus bill agreed upon by congressional leaders of both parties on Wednesday.

The Senate was expected to formally approve the bill late
Wednesday night. A House vote could come as soon as Thursday. 

The rescue package nearly mirrors the financial assistance
request made by the trade group Airlines for America (A4A) early last week.
Stipulations in the bill — preventing carriers from implementing layoffs,
prohibiting stock buybacks and dividends, and capping executive compensation —
also track closely with concessions offered by A4A over the weekend. 

Airlines, bleeding cash due to the Covid-19 crisis, will
begin receiving federal grant money no more than 10 days after the stimulus
bill becomes law. In addition to $25 billion for passenger carriers, the
stimulus includes $3 billion for contractors who employ airline caterers and
groundworkers, such as wheelchair attendants and baggage handlers. Another $4
billion would go to cargo airlines. 

Along with grants, the stimulus bill authorizes the
disbursement of up to $25 billion in government-backed loans and loan
guarantees to airlines, airline maintenance companies and “ticket agents.” Another
$4 billion could be extended to cargo carriers. The loans are to be interest-bearing
and are only to be provided to airlines and other companies that aren’t able to
get financing in the private market. Interest rates will be higher for airlines
that aren’t able to sufficiently collateralize their loans.

The negotiated stimulus bill replaced a Republican version
released on March 20 that would have provided passenger air carriers $50
billion in loans but no grants. All loans would have been required to be
secured, most likely with aircraft.  

This more generous offering does come with stipulations.
Most pressingly, carriers and contractors that accept grants or federally backed
loans will be prohibited from enacting furloughs, pay cuts or benefits cuts
through Sept. 30. That’s one month longer than the offer put forward by A4A on

Carriers would also be prohibited from exercising stock
buybacks or paying dividends through September of next year. Raises would be
prohibited through March 24, 2020, for anyone whose total compensation was $425,000 or more last year. And
executives whose total compensation package exceeded $3 million last year would
see the package cut to halfway between $3 million and what they earned last

Finally, the Department of Transportation would have the
authority to require airlines that accept a government loan to continue flying
to destinations served before the Covid-19 crisis began — a move designed to
assure continued air service to small communities. 

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