US carriers set to receive up to $ 25 billion in Treasury loans

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Five US airlines are expected to receive combined aid of up to $ 25 billion from the US Treasury. The loans would be made to American Airlines, Frontier Airlines, Hawaiian Airlines, Sky West Airlines and Spirit Airlines under the CARES (Coronavirus Aid, Relief and Economic Security) Act.

US airlines are expected to benefit from additional CARES funding of up to $ 25 billion.

Airlines around the world are currently dealing with the fallout from the COVID-19 pandemic. In early March, CEOs of Europe’s largest airlines believed the epidemic would pass quickly with only a momentary impact on the aviation industry.

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However, that couldn’t be further from the truth. Instead, the aviation industry was to experience its worst crisis in just over 100 years of history; worse than September 11, the financial crash and other similar events combined.

Many airlines around the world have been forced to file for liquidation, bankruptcy or other similar measures, including major airlines like Aeromexico and LATAM. Meanwhile, others have called for bailouts, such as the 9 billion euros ($ 10.1 billion) recently allocated to Lufthansa.

Spirit Airlines A321
So far, five airlines have agreed to loan terms. Photo: Getty

What’s new for US carriers?

The US Treasury announced today that it has reached an agreement with five major airlines on the terms of loans to be provided under the CARES Act. The loans will be granted under Title IV of the law. This allows the Treasury to “Provide loans to eligible businesses linked to losses suffered as a result of the coronavirus pandemic.”

However, airlines are required to provide something to compensate taxpayers appropriately. This may include warrants, equity and senior debt securities. In addition, the airlines benefiting from the aid must make commitments to maintain employment levels.

Commenting on the news, Secretary Steven T. Mnuchin said:

“We are pleased that the major airlines intend to use this important program and that the Treasury is using its authority under the CARES Act to provide much needed financial assistance, while ensuring appropriate compensation for taxpayers. Conversations with other airlines continue and we look forward to finalizing the deals as soon as possible. “

United Airlines planes
Other airlines are still in negotiations with the Treasury. Photo: Getty Images

How much will carriers receive?

The US Treasury Department did not specify how much individual airlines should benefit from the loans. However, Reuters did share some details. The publication said American Airlines expects to receive $ 4.75 billion in funding.

Meanwhile, Reuters further reports that Hawaiian Airlines has requested $ 364 million, while Spirit is eligible up to $ 741 million. The publication did not comment on the loan amounts other airlines may be receiving or requesting.

These loans will be on top of additional funding that was already provided to airlines through payroll assistance earlier during the pandemic. In the first wave of funding, American Airlines has already received $ 5.8 billion through the CARES Act.

What do you think of the latest round of funding for the US airline industry? Let us know what you think and why in the comments!

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