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Bloomberg
US airlines probably will avoid applying for some $25 billion in loans under a federal aid package designed to help them survive the collapse in travel from the new coronavirus, according to
JPMorgan Chase & Co.
But the carriers will tap a similar amount in cash assistance for payrolls that should eliminate the risk of near-term bankruptcies, JPMorgan analyst Jamie Baker said.
A stipulation in the draft proposal that requires loan applicants to show that they have no other sources of
capital “will preclude any airline in our coverage universe from applying, at least for the time being,†Baker said.
While other funds are expected to grow more costly and harder to find, the four largest US carriers secured billions of dollars in loans over the past few weeks. American Airlines borrowed $1 billion in term loans under an existing credit facility.
The inclusion of cash aid to support payroll spending in draft versions of the bill reviewed by Bloomberg News was a major victory for the airline industry, which has been battered by a rapid and widespread collapse in demand. Airlines for America, a lobby group for the largest US carriers, had said that lack of such aid would prompt worker furloughs.
The funds will be linked to airlines’ recent spending for labor and could range from $6.3 billion for American, to $440 million for Spirit Airlines, Baker said. Short-term headcount stipulations and “regrettably vague†language on possible equity stakes for the government aren’t troublesome, he said.
“When it comes to grants, we remain concerned that in the absence of second-half demand recovery, airlines could still come to find that court-supervised restructurings are necessary,†Baker said.