American Airlines receives another $3.1bn in payroll support

American Airlines Group has secured at least USD3.09 billion from the US Treasury as part of the government’s Payroll Support Programme Extension Agreement (PSP2) to preserve jobs in the airline sector. A first instalment of USD1.54 billion of the additional PSP2 payment was dispersed on January 15, 2021, to American Airlines and its subsidiaries Envoy Air, Piedmont Airlines, and PSA Airlines. The pay-out was part of a USD6.1 billion first PSP2 payment by the Treasury to a number of benefiting airlines. In total, the Treasury has approved another USD12 billion in payroll support for passenger air carriers to support airline industry workers. This follows after the government passed a new relief bill at the end of December 2020 releasing additional funds to help companies pay salaries following the air traffic collapse caused by the pandemic. To protect taxpayers, American Airlines, like other benefiting carriers, have agreed to issue warrants to the US Treasury to acquire shares in the airline at an exercise price of USD15.66 per share, as required under Section 408 of the PSP Extension Law. American Airlines shares rose 2.6% to USD16.17 dollars at the news. The airline’s stock has climbed 25.5% over the past three months. The airline received more than USD5 billion under the initial PSP enacted at the start of the COVID-19 crisis. “This PSP extension will enable us to bring furloughed team members back to work and resume air service to cities and towns that rely on us,” Chief Executive Officer Doug Parker and President Robert Isom commented on the relief extension. Like other beneficiaries of the PSP2, American Airlines must maintain a minimum level of service as prescribed by the US Department of Transportation, and may not involuntarily terminate employment, or furlough employees, or reduce pay rates or benefits until March 31, 2021. Employees whose jobs were involuntarily terminated or who were furloughed after October 1, 2020, may return to work and be compensated for lost wages and benefits. The airline also cannot buy back its shares, pay dividends, or buy direct or indirect parent company equity security until March 31, 2022. Limits on executive compensation apply until October 1, 2022. The PSP Extension Law (Subtitle A of Title IV of Division N of the Consolidated Appropriations Act, 2021) provides for up to USD16 billion in payroll support for American workers employed by passenger airlines and contractors. Apart from American Airlines, the Treasury has concluded PSP2 agreements with Alaska Airlines, Allegiant Air, Delta Air Lines, Frontier Airlines, Hawaiian Airlines, JetBlue Airways, Republic Airways, SkyWest Airlines, Southwest Airlines, Spirit Airlines, and United Airlines. Together, these airlines represent nearly 95% percent of US airline capacity.