Small airlines exempted from equity demand as US govt aid offers go out

[WASHINGTON] Airlines receiving US$100 million or less in payroll assistance from the US government won't need to provide a financial stake in exchange, the Treasury Department said as it began sending offers to the beleaguered carriers.

"This determination will provide significant support to workers and businesses across the country, while also appropriately compensating taxpayers," Treasury Secretary Steven Mnuchin said in a statement on Friday evening.

The agency said it had received 230 applications for aid from passenger carriers. It is working with 12 that would get more than US$100 million and is discussing what sort of financial instruments it will require in return.

Democrats in Congress have complained about the requirement, saying it was intended for recipients of loans - not the payroll grants that are intended to keep workers employed.

The decision by the Treasury is a victory for many small and niche airlines. Because few of them are publicly traded or have significant assets, they have limited ability to post equity, the head of the Regional Airline Association, Faye Malarkey Black, said earlier this week.

The Trump administration has quickened the pace of distributing the aid amid complaints that the process was moving too slowly as airlines - which are flying only 5 per cent of their usual load - bled cash.

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Representatives of United Airlines Holdings and American Airlines Group said they had received proposed grant packages from the Treasury Department on Friday, without providing specifics.

"We can confirm we heard back from the Treasury Department regarding the application we submitted for government support, and we are currently reviewing the details of their proposal," said Frank Benenati, a spokesperson for United.

At least one other carrier also received a plan Friday, people familiar with the matter said.

President Donald Trump said he'll meet this weekend with airline executives as offers of aid started going out to carriers.

'A GREAT PLAN'

"We have a great plan for the airlines - got to keep the airlines going," Mr Trump said Friday during a White House news briefing.

The more than US$2 trillion federal stimulus package includes payroll grants of US$25 billion for passenger airlines, US$4 billion for cargo haulers and US$3 billion for airline contractors, plus another US$29 billion in loans for passenger and cargo carriers and US$10 billion in grants to airports.

The primary concern for large and small airlines has been getting access to the grants quickly to cover salaries and benefits. Under the law, airlines that get such grants must promise not to lay off workers through Sept 30.

Passenger carriers paid their employees more than US$30 billion last year during a six-month period that the government is using to help determine the amount of the aid for each airline.

The US$25 billion set aside for that purpose won't cover all of the wages and benefits that airline employees earned a year ago. But most pilots and flight attendants are paid by the hour and should see a reduction in what they are paid through September even if they aren't laid off.

Airlines are allowed to make significant cuts in their operations even though the government is requiring a minimum number of flights to cities they serve.

The six major airlines - United, American, Southwest Airlines, Delta Air Lines, JetBlue Airways and Alaska Air Group - paid employees US$27 billion in salary and benefits, according to US Bureau of Transportation Statistics data.

The bureau gathers data from any carrier with revenues of US$20 million or more, so the smallest operators aren't included in the totals.

BIG AIRLINES HAVE ADVANTAGE

The wages and benefits at the major airlines is nearly 90 per cent of the total paid by all passenger carriers, indicating they are likely to get the lion's share of government aid.

The recent steady and sustained drop in US commercial airline travel has seen passenger numbers fall 95 per cent below levels a year ago - an outcome that hasn't been seen since the dawn of the jet age in the early 1960s.

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