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Airlines get $60 billion coronavirus bailout, with strings attached

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  • A bipartisan coronavirus aid package in the Senate offers $58 billion to the nation’s airlines, split evenly between loans and payroll grants.
  • The coronavirus bailout package, which aligns with requests made by US airlines, would prohibit stock buybacks and share dividends for at least a year after the loans have been repaid. It also restricts executive compensation.
  • Airlines would be prohibited from laying off or furloughing employees through September, should the crisis for air carriers continue past then, effectively protecting “hundreds of thousands of jobs,” one union official said.
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Airlines will receive nearly $60 billion in financial assistance as part of the Senate’s rescue package, meeting their request as the industry falls into a tailspin due to the coronavirus pandemic.

The bill grants $25 billion in loans and loan guarantees for passenger airlines, and an additional $4 billion for cargo air carriers.

Additionally, the bill gives airlines $25 billion in grants to pay workers through September. Cargo air carriers get an additional $4 billion.

A separate $17 billion in loans is specified for companies “critical to maintaining national security.” Boeing is reported to be the intended recipient for a large portion of the amount.

The loans are conditional on job protection — airlines accepting aid will not be allowed to lay off or furlough workers until September 30, at which point the crisis could be over or winding down for air carriers.

Airlines receiving aid will also be prohibited from buying back shares of their own stock for a year after the loan is fully paid off and bars them from issuing dividends to shareholders while receiving aid. This provision can be waived by the Treasury Secretary if deemed “necessary to protect the interests of the Federal Government,” though the secretary would be required to testify before the House and Senate in such a case.

Executive compensation for any airline receiving aid is capped at 2019 levels. CEOs of the major US airlines earned between $10 million and $15 million in total compensation in 2018. Figures for 2019 are not yet publicly available.

Under the terms of the loan portion of the bill, the government would take an equity interest in the companies until the loan is paid back — something that Boeing CEO David Calhoun has previously said the company would not want to accept.

How airline industry stakeholders are responding

US passenger and cargo airlines, through the lobbying organization Airlines for America, had jointly asked for $58 billion in aid: $29 billion in payroll grants, and $29 billion in loans.

Airline employee unions have argued that providing aid to the airlines in the form of payroll grants is the fastest way to provide assistance to workers, since there is already a disbursement mechanism in place.

The Association of Flight Attendants (AFA), which represents cabin crew at about 20 mainline and regional airlines, said it was pleased with the deal, and that it would help employees worried about layoffs.

“This is an unprecedented win for frontline aviation workers and a template all workers can build from,” AFA president Sara Nelson said in a statement. “The payroll grants we won in this bill will save hundreds of thousands of jobs and will keep working people connected to healthcare many will need during this pandemic.”

“This is not a corporate bailout; it’s a rescue package for workers—for Flight Attendants, gate agents, pilots, mechanics, caterers, airport maintenance and janitorial staff and everyone who keeps our aviation system moving,” she added.

The Air Line Pilots Association (ALPA), the largest pilots union, reacted similarly.

“From the outset, ALPA maintained that any economic relief bill must put workers first to keep airplanes flying and help move our economy,” Captain Joe DePete, ALPA president, said in a statement.

“ALPA pilots applaud the fact that the economic relief package contains provisions to limit furloughs, protect our contracts, and ensure that federal assistance is used to pay airline employees’ salaries and benefits, not executive compensation or corporate stock buybacks,” he added.

Another $3 billion in payroll grants would be provided to airline contractors that have faced pressure as travel has plummeted. However, it was not immediately clear if airline contractors who were laid off last week would be included in the new protections.

“One passed, the layoff protection for contracted airport workers could be the difference between families going hungry and facing homelessness or holding on safely to survive along with the industry they serve,” Kyle Bragg, president of 32BJ SEIU, which represents airline contract workers in the New York area, said in a statement. “We implore Congress to pass the bill to protect 125,000 contracted airport workers and ensure that our airports can continue to operate after this crisis is over.”

Airlines have seen revenue evaporate since the beginning of the pandemic, as travel demand has plummeted to near zero. Travel bans and border closures, coupled with directives to self-isolate or quarantine have forced airlines to suspend routes, ground planes, and cut costs wherever possible.

Airlines in the US have so far avoided layoffs and furloughs, and offered unpaid leave options to employees. On Saturday, airline CEOs, through a letter from Airlines for America, warned that without payroll grants, staff reductions would be inevitable.

In the letter, the airlines said with payroll grants, they would be able to avoid layoffs until at least August 31, 2020, should the crisis continue through summer. The Senate bill requires an additional month before any job reductions.

United Airlines individually warned employees on Friday that it would begin staff reductions if an aid package was not settled by the end of March.

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