Capitol Report: Airlines say deal on bailout includes provisions for government ownership

Capitol Report: Airlines say deal on bailout includes provisions for government ownership

14 Apr    Finance News

U.S. airlines on Tuesday signaled the deal reached with the federal government on coronavirus aid includes provisions for possible government stakes in carriers.

The $2 trillion coronavirus aid package signed into law on March 27 included $25 billion in assistance for passenger airlines, but carriers and the Treasury Department had been negotiating over terms for the aid, with the government requiring that it get warrants that could lead to stakes in the companies and that 30% of the assistance would have to be paid back.

Preliminary reports on Tuesday afternoon said airlines had reached an agreement in principle with the federal government, but didn’t give details.

Later Tuesday, Southwest Airlines Co. LUV, +1.51% said it anticipated getting $2.3 billion in direct payroll support and a nearly $1 billion unsecured term loan that’s expected to include 2.6 million warrants issued to the Treasury Department.

JetBlue Airways Corp. JBLU, +2.32% said the government will “receive a limited number of warrants, which are the right to buy shares in JetBlue at a pre-determined price.” The carrier said it’s getting a loan that will have to be paid back along with money that doesn’t have to be repaid.

Airlines have seen demand evaporate because of the coronavirus pandemic and resulting stay-at-home orders.

“Alaska Airlines, Allegiant Air, American Airlines, Delta Air Lines, Frontier Airlines, Hawaiian Airlines, JetBlue Airways, United Airlines, SkyWest Airlines, and Southwest Airlines have told us that they plan to participate in the Payroll Support Program,” Treasury Secretary Steven Mnuchin said in a statement on Tuesday afternoon. “Conversations continue with other airlines regarding their potential participation.”

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Airline stocks shot up in extended trading Tuesday after the announcement was made, with Delta Air Lines Inc. DAL, +5.54% , United Airlines Holding Inc. UAL, +6.88% and American Airlines Group Inc. AAL, +3.33% all up around 10%.

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