U.S. Treasury Secretary Steven Mnuchin told major airlines on Friday he wants them to repay some of the $25 billion in cash grants the U.S. Congress approved last month to cover payroll costs, three industry officials briefed on the matter told Reuters.
The Treasury said in a statement Mnuchin will not require passenger air carriers that will receive $100 million in payroll assistance or less to provide compensation and “funds will be available promptly upon approval of their applications.”
Mnuchin spoke with the chief executives of major airlines in separate calls on Friday and told them the department was offering 70% of the aid in grants that would not need to be repaid, and 30% in low-interest loans for which the airlines would be required to offer warrants, the sources said.
Treasury said it is working with 12 passenger air carriers expected to get more than $100 million “to secure appropriate financial instruments to compensate taxpayers.”
The majority of the smaller requests sought less than $10 million and Treasury is not seeking compensation in order to maintain “needed air service,” avoiding layoffs “and limiting share buyback and executive compensation.”
Treasury said it received more than 230 requests from passenger carriers.
Airlines were told they could apply for the amount they paid in salaries and benefits in the second and third quarters of 2019. American Airlines Group Inc AAL.O, with the largest number of employees, had said it was seeking around $6 billion.
A United Airlines Holdings Inc UAL.O spokesman said the company was reviewing the details of Treasury’s proposal. American Airlines also confirmed it was reviewing the proposal.
Airline boards and officials plan to review the proposals all weekend and it is not clear if they will accept the terms or propose a counteroffer.
U.S. President Donald Trump had said airlines would receive details this weekend about the terms of a $32 billion payroll grant package meant to offset the impact of the coronavirus outbreak.
“We have a great plan for the airlines. We’ve got to keep the airlines going. You know it’s never been a great business but it’s a very vital business for the country,” Trump said on Friday.
Under the $2.3 trillion CARES Act, passenger airlines are eligible for $25 billion in cash grants for payroll while cargo carriers can get $4 billion and airport contractors like caterers and airplane cleaners $3 billion.
Reuters reported on Thursday that the six largest U.S. airlines — American Airlines, United Airlines, Delta Air Lines DAL.N Southwest Airlines Co LUV.N, JetBlue Airways Corp JBLU.N and Alaska Airlines ALK.N — are expected to get around 90% of the $25 billion package.
Airlines say they are suffering the worst crisis of their history as travel demand has dwindled to less than 5% of normal levels. Several major U.S. airlines filed for Chapter 11 bankruptcy protection from creditors after the Sept. 11, 2001 attacks or the 2009 financial crisis.
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