Treasury to hold firm on airline aid plan that could give government 3 percent of American Airlines: report
The Treasury Department plans to hold firm on the requirements for its $25 billion airline aid plan, which could give the government a 3 percent stake in American Airlines, officials reportedly said Monday.
The government plan requires airlines to repay 30 percent of the borrowed funds and provide the government with warrants amounting to 10 percent of the loan amount, officials said, according to Reuters.
The plan, aimed to help airlines continue their payrolls during the pandemic, could be agreed upon within the coming days.
Under the current plan, the government could own the largest equity stake in American Airlines, which was looking for $6 billion in payroll support. American Airlines has the most employees of all U.S. airlines and has the lowest market capitalization of the four main carriers at $5.3 billion.
The government could also end up owning about 2.3 percent of United Airlines, 1 percent of Delta Air Lines, 1.3 percent of JetBlue Airways and 0.6 percent of Southwest Airlines, according to Reuters.
Airline shares dropped sharply on Monday, but one industry official told the news service that the warrant price was locked before this happened.
If they take the deal, the airlines cannot conduct mass layoffs until Sept. 30.
Raymond James analyst Savanthi Syth told Reuters that airlines are concerned to increase their debt before travel begins again, leading to more layoffs later.
“That’s the calculation that they have to make: do you say OK, for the long-term health of the company does it make sense to take this money and make furlough decisions later where you might be in a worse debt position, or to maybe walk away from this money and take some of the pain early and then be in a better position once we’re out of the worst of this to try to recover,” Syth said.
About 90,510 travelers went through security on Sunday, down from almost 2.5 million on the day in 2019.
The Hill has removed its comment section, as there are many other forums for readers to participate in the conversation. We invite you to join the discussion on Facebook and Twitter.