Airlines want cash grants included in ‘$58b package’

Bloomberg

US airlines are strenuously pushing the Trump administration and Congress for cash grants, arguing behind the scenes that a Senate proposal to hand them billions of dollars in taxpayer-backed loans isn’t sufficient to guarantee their long-term health, two people familiar with the matter said.
Industry lobby group Airlines for America had been urging the White House to agree to its request for $58 billion.
Now, the airlines and administration officials are pressing Congress for quick action on the industry bailout, aimed to blunt the fallout from the Covid-19 pandemic.
However, the talks are now
focussed on how much of the $58 billion should be designated as loans—with airlines arguing they need cash grants to cover labour costs, said the two people, who requested anonymity because the negotiations are private. Grants would help to preserve the industry’s long-term financial viability, the carriers contend. Right now, the package is entirely made up of loans, which the airlines would have to repay.
Airlines for America, the industry’s lobbying group, said in a statement that “loans alone are not sufficient and should be coupled with a worker payroll assistance programme and targeted tax relief.”
Such an approach would “allow airlines to keep operating through this crisis and protect” the industry’s 750,000 direct employees by keeping them on the job.
The carriers are also arguing that cash grants will reduce the financial impact of an expected flood of unemployment filings across the country, leaving it better positioned to resume regular operations whenever the coronavirus recedes, the people said. Airlines also expect the global economic shock could lead to a deep recession, which would further erode ticket sales this year and next.
Any federal aid for the airlines, be it loans or direct grants, is expected to come with restrictions on how the money can be used, especially as a taxpayer rescue for airlines (and other large private enterprises) has drawn opposition from some in Congress.
Last week, Republican Senator Rick Scott of Florida said “we shouldn’t be bailing out large corporations that have enjoyed years of growth and prosperity.” Meanwhile, about 100 Democrats in the House of Representatives signed a letter to their leadership calling for restrictions in any bailouts. They want federal aid for large companies to be restricted to its front-line workers, caps on senior executives’ pay and equity stakes held on behalf of taxpayers.
The carriers are warning that lost ticket sales for April and May—the two months for which travel is expected to decline most drastically—will total more than $26 billion at the four largest US airlines. Together, they spend about $3.7 billion per month on employee compensation, supported by about $13.2 billion in monthly revenues in normal times, according to their 2019 financial statements.
The airlines want the grants to help cover payrolls, which would in any case largely be paid from government and private loans, the people said.
Such an arrangement would let the largest carriers, including American Airlines and United Airlines, emerge from an economic downturn in a healthier financial state and lessen their debt loads, they said.