Mnuchin: Any money given to airlines must go to pay its employees
Treasury Secretary Steven Mnuchin says airlines must keep all of their employees and explains that the money they receive will be allocated toward paying them.
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Major U.S. airlines applied on Friday for payroll grants from the U.S. Treasury meant to keep workers employed during a sharp downturn from the coronavirus, though the terms of any aid were still unclear and some warned that funds would not be enough to help them through their toughest crisis ever.
American Airlines Group Inc, United Airlines Holdings Inc, Delta Air Lines Inc, Southwest Airlines Co and JetBlue Airways Corp each said they had submitted grant applications but did not disclose details or terms.
Treasury had asked companies to propose financial instruments such as warrants or equity options as possible taxpayer compensation for up to $32 billion in payroll grants for airlines, cargo carriers and airport contractors under the CARES Act passed by Congress last week.
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Treasury set a 5 p.m. EDT (2100 GMT) Friday deadline to expedite the grants. There is a second final deadline on April 27.
The airline industry has pushed back on the possibility of the government taking an equity stake in exchange for the grants, which the companies and unions argue are strictly to protect workers.
Southwest made clear on Friday that government support is just one possible source of capital it is evaluating, with talks over the terms of any government agreement expected over the next several days.
In memos to employees, Delta and JetBlue executives warned that government funds would not be enough to help them weather an unprecedented crisis in which they are spending more cash every day than they are bringing in.
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Companies were allowed to ask Treasury for the amount they paid in salaries and benefits in the second and third quarters of 2019, and must agree to keep their workforce until Sept. 30 and maintain a certain level of air service.
American Airlines, with the largest number of full-time employees among U.S. airlines at 133,700 in 2019, had said it would seek up to $6 billion in grants and $6 billion in government loans under a separate $32 billion funding option for the sector.
American stock hit a record low on Friday, and Warren Buffett's Berkshire Hathaway Inc, which is among the largest shareholders of the top U.S. airlines, said it sold about 18% of its Delta stake and 4% of its Southwest holding.
Among cargo carriers, FedEx Corp said it could benefit from certain government relief options after outlining other steps it is taking to save cash and boost liquidity, including slashing its chief executive officer's pay and drawing down $1.5 billion from a credit facility.
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Cargo carriers are suffering from disruption to global supply chains and high-margin business-to-business demand, even as ground-package delivery services increase.
Airlines have also raised debt and taken a series of cost-cutting measures as they ground an unprecedented number of planes and implement new policies on ticket refunds and exchanges in an effort to encourage passengers to book flights.
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Passenger airlines are eligible for $25 billion in cash grants, cargo carriers $4 billion and airport contractors like caterers and airplane cleaners $3 billion, and an equal amount in loans.
Other airlines across the world are also seeking government aid as they brace for a prolonged downturn, with Air France-KLM in talks with banks to receive up to 6 billion euros ($6.5 billion) in loans guaranteed by the French and Dutch governments, sources told Reuters.
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Planemakers are also preparing for a slump in demand, with Reuters reporting on Friday that Airbus SE is studying a sharp cut in output of its top-selling A320 jet series.
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