US government agrees on $25bn bailout for airlines as pandemic halts travel

The US government agreed a $25bn bailout for the beleaguered airline industry on Tuesday as the coronavirus pandemic brings travel to a virtual standstill.

Passenger airline companies are receiving direct aid as part of the $2.2tn Coronavirus Aid, Relief, and Economic Security Act (Cares Act) economic relief package passed last month in order to allow them to continue paying salaries and benefits to employees in the coming months.

Details of the aid package are expected later on Tuesday.

With the coronavirus now spread across more than 100 countries and every continent except for Antarctica, air travel has all but ground to a halt.

The International Air Transport Association (Iata) is predicting airlines will lose $314bn in revenue this year, 25%, almost three times the amount it forecast in a “worst-case scenario” five weeks ago after reassessing the hit to the global economy it expects.

The grants to major airlines including American, Delta, Southwest, JetBlue and United will probably come with strings attached. According to the Wall Street Journal the airlines had wanted the loans to be forgiven but the treasury secretary, Steven Mnuchin, told carriers that 30% of the assistance would need to be repaid, and that airlines would have to offer stock warrants – giving the government the right to buy shares in the companies – on a portion of those funds.

There was widespread criticism after the last recession when the US taxpayer bailed out some the US’s largest banks and the auto industry but did not gain from their eventual recovery.

In a statement, Mnuchin said: “We welcome the news that a number of major airlines intend to participate in the payroll support program. This is an important Cares Act program that will support American workers and help preserve the strategic importance of the airline industry while allowing for appropriate compensation to the taxpayers.”

American Airlines will receive $5.8bn as part of the deal and plans to request a loan for a further $4.8bn. “The payroll support program recognizes the extraordinary dedication of our entire team, and importantly, sustains the critical air service being provided by our front-line team members,” Doug Parker, chief executive of American Airlines, said in a statement.

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