U.S. Treasury agrees on loan terms with American, four other airlines
WASHINGTON (Reuters) - The U.S. Treasury said on Thursday it has agreed on terms for government loans with five U.S. carriers, including American Airlines Group Inc (AAL.O).
The Treasury said it had signed letters of intent with American, Frontier Airlines, Hawaiian Airlines (HA.O), SkyWest Airlines (SKYW.O), and Spirit Airlines (SAVE.N) under a $25 billion emergency loan program created by Congress in March.
American said in April it expected to apply for a loan from the U.S. Treasury of approximately $4.75 billion on top of $5.8 billion in payroll assistance.
Treasury separately awarded airlines $25 billion in payroll assistance bailouts with most of the aid in the form of grants that does not need to be repaid.
Treasury Secretary Steven Mnuchin said in a statement that “conversations with other airlines continue, and we look forward to finalizing agreements as soon as possible.” Airlines have until Sept. 30 to decide whether to take the loan.
Like the payroll assistance funds, the loans come with a ban on stock buybacks and paying dividends and set limits on executive compensation.
Hawaiian Airlines, which was awarded $292 million in payroll assistance, had sought an additional $364 million Treasury loan.
Spirit was awarded $335 million in payroll assistance and said it was eligible for $741 million in Treasury loans. SkyWest received $438 million in payroll assistance.
Airlines have warned that a recent spike in U.S. coronavirus cases could dampen travel demand that is still off around 75% from last year but has rebounded significantly over April lows.
American warned on Thursday that it is overstaffed by around 8,000 flight attendants.
Airlines can furlough or eliminate jobs starting Oct. 1.
Last week, six U.S. unions representing aviation workers told lawmakers another $32 billion in payroll aid is needed to keep hundreds of thousands of workers employed through March 31.
Reporting by David Shepardson; Editing by Chizu Nomiyama and Jonathan Oatis