Two major Texas airlines have both received billion-dollar bailouts from the U.S. government.
- Dallas-based Southwest Airlines will receive more than $3.2 billion.
- Fort Worth-based American Airlines Group Inc. will get $5.8 billion.
They're among a number of major airlines getting financial aid from the U.S. Department of the Treasury — part of the $2 trillion economic stimulus plan that Congress passed in March.
The funds come from the Payroll Support Program (PSP), created through the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The money will go toward airline personnel salaries and benefits, and come in two forms: direct grants which the airlines won't have to repay, and loans, which they will have to repay.
Southwest Airlines' $3.2 billion consists of more than $2.3 billion in payroll support, plus a nearly $1 billion unsecured term loan.
American Airlines' $5.8 billion consists of $4.1 billion in payroll support, plus a $1.7 billion loan. On top of that $5.8 billion, American will apply separately for another loan from the U.S. Treasury of approximately $4.75 billion.
In a statement, American Airlines chairman and CEO Doug Parker applauded the "collaborative, bipartisan approach" that the U.S. government took to hand out such a big chunk of change.
"The Payroll Support Program recognizes the extraordinary dedication of our entire team, and importantly, sustains the critical air service being provided by our frontline team members," Parker said. "Those team members are our heroes, and we are elated that this program will enable us to continue to employ and pay our team while they fly through this period of depressed consumer demand."
According to CNN, the airlines were initially balking at the idea of paying back any of the money at all, and that delayed this settlement. A coalition of unions representing pilots, flight attendants, and other aviation personnel wrote a letter to the Treasury Secretary saying that if the payroll grants were delayed, the aviation industry would collapse.
Other airlines expected to get funds include Alaska Airlines, Allegiant Air, Delta Air Lines, Frontier Airlines, Hawaiian Airlines, JetBlue Airways, United Airlines, and SkyWest Airlines. Smaller airlines that receive less than $100 million in aid may not be required to pay back their aid.
The Payroll Support Program protects American Airlines' personnel from involuntary furloughs or pay rate reductions through September 30, with the assumption that demand for air travel will have recovered by then.
The loans are expected to have a 10-year term with low interest rates and may be repaid at any time prior to maturity.
The airlines have also agreed to limitations on stock buybacks, dividends, and executive compensation, i.e. no raises until 2022.
The PSP differs from the $350 billion Paycheck Protection Program, created to help small businesses with up to 500 employees with loans which are converted into grants if they keep their workers through the crisis. According to the NY Post, those funds are nearly depleted.