According to a communiqué from US Treasury Department on Tuesday, major Airlines like American Airlines Group Inc (NASDAQ:AAL), Southwest Airlines Co (NYSE:LUV), United Airlines Holdings Inc, and Delta Air Lines, Inc. have agreed to accept billions of dollars of aid. The US government is offering grants and low-interest loans to the major airlines in the nation to keep the employees on the payroll. It is also working with other airlines to protect the jobs of Americans.
Steve Mnuchin, the US Treasury Secretary said the department is reviewing the applications of smaller passenger air carriers and expect to approve soon. The department will soon discuss with cargo operators in the nation.
No need to repay the grants
American Airlines will receive $5.8 billion comprising grants ($4.1 billion) and low-interest loans ($1.7 billion). The airline company need not repay the grants of $4.1 billion. It will also apply for additional loans of $4.75 billion.
In an internal communication with the employees, Robert Isom, the president, and Doug Parker, Chief Executive Officer of American Airlines said the company will have sufficient funds to navigate through this crisis and serve the public when they are ready to fly.
Stock warrants as collateral for the loan
Southwest Airlines will receive $3.2 billion that comprises $2.2 billion as grants and $1 billion as a loan from the US Treasury Department. It will pay back the loan within 10 years. It is a secured loan with stock warrants as collateral.
Donald Trump earmarks $58 billion for the airline industry
Donald Trump, the President of the US, has last month has approved a coronavirus stimulus fund of $2 trillion, of which $58 billion is earmarked for the airline industry. With financial assistance from the US government, the airline industries can pay their employees through September. Several airline industries stocks have surged in after-hours trading on Tuesday because they agreed for a stimulus package worth $25 billion from the US Government.
The airline carriers have canceled over 70% of the flights because the passenger counts have declined by 96%. According to an international airline association, the losses for the airline industry worldwide expect to reach $314 billion. Several employees in the airline industry across the world have either lost their jobs or unpaid because of the coronavirus pandemic.
