WASHINGTON: U.S. Treasury Secretary Steven Mnuchin was holding calls with airline CEOs throughout the day on Friday, April 10 and announced details of a $32 billion payroll grant package later this afternoon.
Under the $2.3 trillion CARES Act, passenger airlines are eligible for $25 billion in cash grants for payroll while cargo carriers can get $4 billion and airport contractors like caterers and airplane cleaners $3 billion.
U.S. Treasury Secretary Steven Mnuchin told major airlines that he wants them to repay some of the $25 billion in cash grants the U.S. Congress approved last month to cover payroll costs as airlines weather an unprecedented crisis.
According to a report that the six largest U.S. airlines, American Airlines Group), United Airlines , Delta Air Lines, Southwest Airlines Co, JetBlue Airways Corp and Alaska Airlines are expected to get around 90% of the $25 billion package.
After receiving some 275 applications for the payroll grants last week, Treasury requested additional detailed information on capital structure, liquidity and loyalty programs, sources told Reuters.
The Treasury said in a statement Mnuchin will not require passenger air carriers that will receive $100 million in payroll assistance or less to provide compensation and “funds will be available promptly upon approval of their applications.”
Mnuchin spoke with the chief executives of major airlines in separate calls on Friday and told them the department was offering 70% of the aid in grants that would not need to be repaid, and 30% in low-interest loans for which the airlines would be required to offer warrants, the sources said. The interest rates would rise over time if airlines had not repaid them, the sources said.
That means that every $1 billion in government aid would include $700 million in grants, $300 million in low-interest loans and an option for the government to buy $30 million in shares. Two people said the warrants would be priced at current stock prices.
Treasury said it is working with 12 passenger air carriers expected to get more than $100 million “to secure appropriate financial instruments to compensate taxpayers.”
The majority of the smaller requests sought less than $10 million and Treasury is not seeking compensation in order to maintain “needed air service,” avoiding layoffs “and limiting share buyback and executive compensation.”
Airline unions and Democrats in the U.S. Congress have pressed Treasury to grant the assistance quickly and without requiring unreasonable conditions on airlines that are struggling.
