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Treasury, airlines reach deal on $25B COVID-19 relief bailout

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Treasury, airlines reach deal on $25B COVID-19 relief bailout
A Southwest Airlines plane taxis for takeoff, passing an American Airlines plane that has just arrived at St. Louis-Lambert International Airport in St. Louis on March 28. Photo by Bill Greenblatt/UPI | License Photo

April 15 (UPI) -- The Trump administration has reached a deal in principle with 10 major U.S. airlines on a $25 billion payroll bailout program.

Treasury Secretary Steven Mnuchin announced Tuesday that Alaska Airlines, Allegiant Air, American Airlines, Delta Air Line, Frontier Airline, Hawaiian Airlines, JetBlue Airways, United Airlines, SkyWest Airlines and Southwest Airlines have informed the Trump administration of their plans to participate in the Payroll Support Program.

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Designed to help companies pay workers amid the COVID-19 pandemic that has brought several major industries, including airlines, to a halt, the bailout program is part of the $2.3 trillion coronavirus relief bill President Donald Trump signed in late March.

Without revealing specifics about the deal, Mnuchin said in a statement that the administration welcomes the agreement as it will "support American workers and help preserve the strategic importance of the airline industry while allowing for appropriate compensation to the taxpayers."

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He added that conversations with other airlines over the bailout was ongoing and that the Treasury was working to review and approve the applications of smaller airliners for inclusion in the bailout.

Trump heralded the agreement as a way to "fully support" the airline workers and preserve the industry's role in the economy.

"Our airlines are now in good shape, and they will get over a very tough period of time that was not caused by them," he said during a press briefing Tuesday.

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Lobby group Airlines for America also cheered the deal, saying it will ensure the country's 750,000 people on airline payrolls will receive paychecks through the end of September when the industry hopes business with rebound.

"Given these circumstances, we are deeply appreciative for the Payroll Support Program, which is an important first step in a long path toward recovery for an industry that remains critical for connecting our country and driving economic growth," Airlines for America President and CEO Nicholas E. Calio said in a statement.

However, not everyone was as receptive to the deal.

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Joe DePete, president of the Air Lines Pilots Association, said while pleased a number of airlines have signed onto the program he disagrees with the constraints being placed on funding by the Treasury.

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Based on specifics of deals released by several of the companies, about 30 percent of the funds to be dispersed will be received as low-interest, 10-year loans, which DePete says may lead to future furloughs.

"Unfortunately, Treasury is undermining the intent of the CARES ACT by treating a portion of the grants designed to protect jobs not as grants but as loans, which will make it harder to stop layoffs and slow the recovery," DePete said, adding that in spite of the loans issue he is "optimistic" about the deal.

The Association of Flight Attendants-CWA also rebuked Mnuchin for "playing games" with the aid during the negotiation process prior to the CARES Act being sent to Congress for vote.

"Now we must fight to keep aviation intact to protect our industry and ensure our economy lifts off again when the virus is under control," AFA President Sara Nelson said in a statement. "We have seen what happens when investment bankers like Secretary Mnuchin control the outcomes, and we will not stand by to watch it play out again."

American Airlines said it will receive $5.8 billion in assistance from the payroll program as a $4.1 billion direct grant and a low-interest loan of $1.7 billion. The company said it also plans to apply to the Treasury for an additional $4.75 billion loan.

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"The Payroll Support Program recognizes the extraordinary dedication of our entire team and, importantly, sustains the critical air service being provided by our front-line team members," American Airlines Chairman and CEO Doug Parker said in a statement.

Southwest Airlines said it will receive more than $3.2 billion from the program with $2.3 billion in direct payroll support and a $1 billion low-interest loan to be paid back in 10 years. The deal includes conditions that prohibit involuntary furloughs and reductions in employee pay and benefits through Sept. 30, as well as the elimination of share repurchases and dividends and puts limits on executive compensation until March 24, 2022.

"We applaud the quick action by the U.S. Department of Treasury to infuse liquidity into the economy and try to keep businesses open and people on the job -- and that certainly includes the airlines and our employees," said Southwest Airlines Chairman and CEO Gary Kelly in a statement.

In a memo to its 23,000 employees, JetBlue said it will receive $935.8 million in bailout of which $250.7 million will be a low-interest loan.

"While I am happy we are receiving this much-needed cash for payroll now, it adds to the significant debt we are taking on as we burn through our cash reserves," JetBlue CEO Robin Hayes warned in a statement. "Thankfully, we entered this crisis with one of the stronger balance sheets in the industry but we will come out of this with significant debt to pay down."

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Alaska Airlines, with Horizon Air, said in a statement it will receive $992 million, $267 million of which will be a low-interest loan. In exchange, the government will receive the right to buy 847,000 non-voting shares of Alaska Air Group at $31.61 a share. The company also said it plans to apply for an additional $1.128 billion in federal loans under a separate program in the CARES Act.

Delta said it worked out a $5.4 billion deal of which $1.6 billion will be treated as a low-interest, 10-year loan. And in return, the government will be able to buy about 1 percent of the airline's stock at $24.39 per share, the Atlanta Journal-Constitution reported.

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