Treasury Urges Airlines to Apply for Payroll Grants by Friday
The notice is among new details on coronavirus loan eligibility for airlines
The Treasury Department released new details Monday night on how it will award grants and loans for airlines affected by the coronavirus pandemic, and urged companies to submit some applications by Friday to begin receiving funds as soon as possible.
The aid was approved as part of a $2 trillion economic relief package Congress passed last week, which included $25 billion in grants, along with $25 billion in loans and loan guarantees for passenger airlines, $4 billion for cargo carriers and $17 billion for other firms critical to maintaining national security.
The Treasury said Monday night that passenger and cargo airline companies should submit their requests for grants to cover payroll expenses no later than 5 p.m. on April 3, or risk processing delays, and applications submitted after 11:59 p.m. on April 27 may not be approved. Payroll-support grants will be based on an airline's total salaries and benefits paid to employees from April 1 through Sept. 30, and are contingent on the companies refraining from involuntary layoffs, furloughs or salary reductions during that time period, the Treasury said.
Companies must also identify in their applications any financial instruments, such as warrants or equity, and proposed terms "to provide appropriate compensation for the government," the Treasury guidance said. The law authorized Treasury Secretary Steven Mnuchin to take a stake in airlines as part of the grant and loan agreements.
As part of the grant approval process, the firms must sign payroll-support agreements that detail the terms, as well as any limits on executive compensation required under the law and provisions to claw back the funds if a company fails to satisfy the terms and conditions.
Airlines and labor unions pushed hard for half of the government assistance to come in the form of cash that carriers could access immediately and use to keep paychecks flowing. Several have said they'll keep all their employees on for the next six months--the main condition of payroll assistance--and some carriers have already indicated they'll likely ask for the aid.
American Airlines Group Inc. executives told employees that the airline stands to receive about $12 billion in federal assistance.
"We intend to apply for these funds and are confident that, along with our relatively high available cash position, they will allow us to fly through even the worst of potential future scenarios," Chief Executive Doug Parker and President Robert Isom wrote Monday.
Still, executives have warned workers that there will be fewer hours to work, and therefore lower pay, in the coming months. Airlines have asked for volunteers to take leaves of absence with partial or no pay, or to retire early. Delta Air Lines Inc. said last week it has had 21,000 volunteers for unpaid leaves, and could use more.
United Airlines Holdings Inc. executives said Friday in a message to employees that they expect travel demand to remain depressed for months, possibly into next year.
"If the recovery is as slow as we fear, it means our airline and our workforce will have to be smaller than it is today," Chief Executive Oscar Munoz and President Scott Kirby wrote.
The agency also detailed preliminary requirements for airline loans, including a description of a borrower's existing debt and scheduled debt service for the next three years and their employment levels as of March 24. They must also provide consolidated financial statements of the company and its parents over the previous three years, a description of the losses they expect to incur as a result of the coronavirus and evidence that they can't reasonably obtain credit elsewhere.
Applications must provide descriptions of their operations, description of all assets that could be pledged to secure the loan, how they intend to use the money, an operating plan for the rest of 2020 and any plans to restructure their obligations, contracts or staffing.
The Treasury said it would release more details on the loan program "promptly," including how the principal loan amounts will be determined, how applications will be evaluated and other loan terms and conditions.