US Treasury firms loans to seven airlines under CARES

The US Treasury has closed loan agreements with seven major carriers and expects the amount of funding available to each of them to increase after Delta Air Lines (DL, Atlanta Hartsfield Jackson) and Southwest Airlines (WN, Dallas Love Field) opted out of the programme. Ahead of the September 30 deadline for the formalisation of the loans, Alaska Airlines, American Airlines, Frontier Airlines, JetBlue Airways, Hawaiian Airlines, SkyWest Airlines, and United Airlines agreed on their terms with the Treasury. The total pool of funds eligible under the CARES Act programme is USD25 billion, with a maximum of USD7.5 billion loaned to any particular carrier. Despite having reached a preliminary agreement with the Treasury, both Delta Air Lines and Southwest Airlines said that they would skirt federal funding and seek additional capital on private markets. This decreased the number of airlines sharing the USD25 billion pool. American Airlines said earlier it expects to make use of the maximum allowed loan amount and will eventually borrow USD7.5 billion from the government. So far, it has been loaned USD5.5 billion. The federal financing, however, comes with multiple conditions, including a requirement that borrowers provide warrants, equity interest, or senior debt instruments to the US government, which will, in turn, allow the state to take stakes in the carriers. Meanwhile, the other part of the CARES Act package, the USD25 billion federal payroll support package, expires at 2359L on September 30. Multiple airlines have warned that they will be forced to lay off thousands of staff if it is not extended through March 2021. While an extension of the package has been proposed in Congress by the Democrats and has received the support of President Donald Trump, it has yet to be passed. “We call on Congress to extend the Payroll Support Program so we can continue to support aviation industry workers as our economy reopens and we continue on the path to recovery,” Treasury Secretary Steven Mnuchin said.