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Airlines Finalize CARES Act Loan Funding

Beautiful sky with wing airplane

After receiving financial aid from the CARES Act, the major American airlines have finalized the terms of U.S. Treasury Loans. Ten aviation companies will accept loans, including regional sub-carrier SkyWest, representing up to $25 billion in liquidity.

America’s airlines will soon owe money to the U.S. Treasury in the form of direct loans. The agency announced on July 7, 2020 10 airlines will accept government money provided through the CARES Act.

Loans Represent $25 Billion in Liquidity

According to a statement by Treasury secretary Steven T. Mnuchin, the loans will provide up to $25 billion in liquidity to American civil aviation leaders. The airlines signing a letter of intent are: Alaska Airlines, American Airlines, Delta Air Lines, Frontier Airlines, Hawaiian Airlines, JetBlue, SkyWest Airlines, Spirit Airlines, Southwest Airlines and United Airlines.

“The major U.S. airlines play a vital role in our economy and are critical to domestic and international travel and commerce,” said Mnuchin in the press release. “These airlines are among the companies most heavily affected by the disruptions to social and economic activity caused by the pandemic. We look forward to working with the airlines to finalize agreements and provide the airlines the ability to access these loans if they so choose.”

The loans are in addition to the Payroll Assistance Program money the airlines accepted in April 2020. According to the respective programs’ first quarter financial reports:

  • American accepted $5.8 billion in payroll support
  • Delta received $3.8 billion in grants
  • JetBlue took $936 million in payroll support
  • Southwest accepted $2.3 billion from the PSP program
  • United took $3.5 billion from grants

Loans Come Before Second Quarter Results

While we know some of the terms of the loans through the CARES Act, more information about total loan amounts and conditions are expected from the airlines second-quarter financial reports. Delta will hold their earnings webcast on July 14, 2020, while United will hold their earnings webcast on July 22, 2020.

Before accepting loans, airlines were turning to their loyalty programs to raise liquidity into the second quarter. American Airlines valued their loyalty program at up to $30 billion, while United used their loyalty program to lead a fundraising round.

cscasi July 8, 2020

Interesting that Jet Blue only took $936 in payroll support, while the others took billions. Left out a word?