Over 275 applied for Aviation Grants, 90% of the package is going to these 6 airlines.
Part of the $2.3 trillion dollars in the CARES Act, includes a substantial grant to be provided to passenger airlines. A total of $25 Billion in cash grants will be allocated specifically for the purpose of payroll. Cargo Carries will be eligible for total of $4 Billion in grants. Airport contractors such as caterers and airplane cleaning companies will be able to access a total of $3 billion in available funds.
President Donald Trump spoke on Thursday about some of the details the airlines can expect to receive this weekend regarding the terms of the $32 billion dollar payroll grant. The grant is designed to offset the impact of the Coronavirus (COVID-19) outbreak on individuals.
Earlier, Mnuchin told CNBC that the airline package would be the next “big thing we’ll be rolling out” as part of the CARES Act, with preliminary information starting on Friday.
“And it is our objective to make sure, as I’ve said, this is not a bailout, but that airlines have the liquidity to keep their workers in place,” Mnuchin said. -CNBC
“I think it’s going to be a very acceptable package. It’s a very big package,” Trump said, noting it will be “good for the airlines.”
“We’ll be probably putting out a proposal and giving them some of the very powerful details over the weekend. It’s moving along quickly. The airline business has been hit very hard,” Trump said following a briefing with Treasury Secretary Steve Mnuchin.
Of the total of 275 aviation companies that have applied for the grant money over 90% of the funds will be directed towards 6 of the largest U.S. based airlines. The airlines that will be receiving the largest portion of the funds are the following (Listed in no particular order); American Airlines (AAL), United Airlines (UAL), Delta Air Lines (DAL), JetBlue Airways (JBLU) and Alaksa Airlines (ALK).
The Treasury could require that companies repay a portion of the amount provided with low interest rates that are set to increase after 5 years of maturation. The terms of any warrants are still unclear and the final numbers are still in discussion between the airlines conversations with the Treasury. Certain parameters have been mentioned such as funds not being allowed to be used for executive salaries for example.
Mnuchin has made it known that taxpayers will be compensated for the grants. On the opposite side of the discussion airline unions and Democrats have brought the discussion that demanding equity or warrants could affect the initial object and purpose of the act. Continuing down this course can lead to more potential layoffs and bankruptcies for airlines.
Sara Nelson, The president of the Association of Flight Attendants mentioned in a statement that “any financial instrument on a grant means it’s no longer a grant.” she has been leading the idea that grants go specifically for workers’ payroll.
The Southwest Pilots union said it expects to hear sometime this week updates on if airlines will accept the terms of the grant. As the talks continue the Treasury is asking for additional information on capital structure, liquidity and loyalty programs. They are asking for details on daily cash burn rates and when they expect to run out of cash and their best estimates for projected wages and benefits between April 1st and Sept. 30th.
With airlines cutting flights around the world to meet the current travel demands which are less than 5% of normal levels. Just on Wednesday of this week the number of people screened at U.S. airport by the Transportation Security Administration fell to a major low of only 94,931 traveler. This is a dramatic drop from the average daily norm of 2.23 Million.
With only a small portion of funds being allowed to many of the smaller airlines the question is raise on how they will be able to remain operational. Many of these smaller airlines do not have access to capitol or are not able to remain operation due to their tight margins.
Regional airlines and charter airlines will need to satisfy the requirements of the Treasury if they wish to receive federal funds. There are various sources available currently for those who are looking to gain more information on the topic.
For more information on the CARES Act please reference the official FAA page. – https://www.faa.gov/airports/cares_act/
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