The largest United States air carriers have all now signed letters of intent with the US Department of the Treasury paving the way for federal loans to help them weather the novel coronavirus.
United Airlines, Alaska Airlines, Delta Air Lines, JetBlue Airways, and Southwest Airlines were among the list of carriers the Treasury said on Tuesday had signed letters regarding the loan terms, which would include the issue of warrants and restrictions on executive compensation and share buy-backs.
“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,” Treasury Secretary Steven Mnuchin said in a statement.
Last week, the Treasury said it had agreed on the terms for government loans under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, with five other airlines including American Airlines.
Airlines have already received $25bn in payroll aid under the CARES Act to protect hundreds of thousands of jobs through September, and are eligible for another $25bn loan programme.
US unions representing aviation workers have separately asked lawmakers to extend the payroll aid package through March as Congress considers a new round of spending to address coronavirus-related issues and jobs.
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.
US carriers, suffering the industry’s worst crisis as the coronavirus pandemic crushes demand, have until September 30 to decide whether to take the loan. They can furlough or eliminate jobs starting October 1.
Travel has picked up in some areas over the past two months as economies open up and travel restrictions loosen, though a recent spike in COVID-19 cases in some US states has triggered more restrictions and started to weigh on bookings again.
On Tuesday, United Airlines warned its employees during a virtual town hall meeting that the surge in infections was already hitting bookings.
United‘s reservations for travel within the coming month quickly began to slide after the states of New York, New Jersey and Connecticut said they would require people arriving from hot-spot states to quarantine for 14 days, a person with knowledge of the matter told Reuters news agency.
The slump was most pronounced at United‘s Newark hub, where near-term net bookings were just about 16 percent of year-ago levels as of July 1.
United told employees to prepare to receive notifications of potential furloughs under the Worker Adjustment and Retraining Notification (WARN) Act as soon as this week, according to an internal memo reviewed by Reuters.
Raymond James analyst Savanthi Syth said in an investor note that the bookings trend was likely much broader than the New York area, noting that at least 14 states are requiring out-of-state visitors to undergo a 14-day quarantine.
Delta, which kicks off second-quarter airline results on July 14, said last week it may scale back the number of flights it had planned to add in August due to the surge in COVID-19 cases.
US airlines have already drastically reduced their flight capacity and rushed to shore up capital while encouraging employees to accept early departure packages to avoid forced reductions.