Utah’s SkyWest enters $573mn CARES Act facility, draws $60mn

SkyWest, the holding company for SkyWest Airlines (OO, Salt Lake City) and SkyWest Leasing, has entered into a five-year loan and guarantee with the United States Treasury Department in which it can borrow up to USD573 million under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, it confirmed in a statement on September 29. On the same day, SkyWest borrowed USD60 million under the facility and now has until March 26 next year to determine whether it will borrow additional amounts. It is allowed to do so in up to two further borrowings. The interest rate under the secured term loan facility is LIBOR plus 3% with no amortisation. SkyWest is obligated to issue warrants to the Treasury to buy shares of common stock based on the amounts drawn under the facility. In connection with the initial sum drawn, for example, the airline issued warrants to purchase 211,416 shares at an exercise price of USD28.38 per share. As with similar deals, the loan and guarantee agreement with SkyWest includes certain restrictions, such as on the payment of dividends and the repurchase of SkyWest shares. The loan is collateralised by aircraft engines and parts. SkyWest Airlines has a fleet of 538 Bombardier Aerospace CRJ and Embraer ERJ aircraft, the ch-aviation fleets advanced module shows, operated through partnerships with Alaska Airlines, American Airlines, Delta Air Lines, and United Airlines, carrying more than 43 million passengers in 2019. SkyWest confirmed in early August that it expects to reduce its fleet of CRJ200s by 70 aircraft to around 130 by the end of 2020, with 40 already earmarked for sale or part-out. Three of SkyWest’s partners, Alaska, American, and United, also had additional Treasury loans approved on September 29. It is not yet clear whether the new money will help the troubled carriers avoid further layoffs. Mnuchin did not say how much more money Alaska Airlines or the others will borrow under CARES, but an Alaska spokeswoman confirmed the new loan while also declining to comment on the amount, saying it would be disclosed later.