A4A President and CEO Nicholas E. Calio has issued the following statement:
On behalf of the leading U.S. airlines and 750,000 employees, we are grateful for the work of the Trump Administration – especially President Trump, Vice President Pence, Secretary Mnuchin and Secretary Chao – and members of the Senate and the House for their efforts to provide Direct Payroll Assistance funds, as allocated in the CARES Act, which will help protect the jobs of pilots, flight attendants, mechanics, gate agents and other people who need to pay rent and mortgages and put food on the table for their families during the COVID-19 pandemic.
This funding will allow those 750,000 men and women to stay on airline payrolls though Sept. 30, 2020, and out of the unemployment lines, which is critically important at a time when we already have seen multiple weeks of historically high unemployment claims.
Since the onset of this public health crisis, U.S. airlines have been taking substantial steps to protect our direct jobs as well as the 10 million jobs supported by the industry. Carriers have made cuts everywhere possible from retiring fleet types earlier than scheduled, significantly reducing executive compensation, shutting airport lounges, trimming capital expenditures and offering early retirements. The Direct Payroll Assistance funds from the Federal Government are an important part of the efforts to protect jobs. Our employees are the backbone of the industry and our greatest resource.
The novel coronavirus pandemic has had – and continues to have – a severe and unprecedented impact on the U.S. airline industry. Before this global emergency, U.S. airlines were transporting a record 2.5 million passengers and 58,000 tons of cargo each day. U.S. carriers were well positioned to carry record numbers of travelers in 2020. Now, 95 percent of Americans are under stay at home orders. As a result, passenger volume is down 97 percent, equating to a customer level we have not seen since 1954. Airlines have parked 2,240 aircraft, and they are burning through cash at a rapid rate – $10-12 billion a month – as cancellations far outpace new bookings.
Given these circumstances, we are deeply appreciative for the Payroll Support Program, which is an important first step in a long path toward recovery for an industry that remains critical for connecting our country and driving economic growth.
Airlines Reporting Details of Their Agreement
Alaska Airlines and Horizon Air will receive a total of $992 million, to be used exclusively for the cost of employee payroll and benefits. The funding is expected to cover about 70% of budgeted costs through Sept. 30, 2020, and was based on similar costs reported by the airlines for the period of April through September 2019.
Of the $992 million, $267 million will be in the form of a loan and must be repaid to the government. Additionally, the Treasury will receive the right to buy 847,000 non-voting shares of Alaska Air Group at a price of $31.61/share.
Alaska also agreed to additional conditions such as no involuntary furloughs or changes to rates of pay through Sept. 30, 2020, continued suspension of dividends and share repurchases until Sept. 30, 2021, limits on executive compensation through March 24, 2022, and continuation of service as reasonable and practicable under a Department of Transportation rule.
Southwest Airlines will receive the funding support necessary to protect the jobs of its more than 60,000 employees through at least September 30, 2020, with the fundamental goal to maintain the carrier's unprecedented 49-year history absent a single involuntary furlough.
Southwest's expected disbursements under the program total more than $3.2 billion, consisting of more than $2.3 billion in direct payroll support and a nearly $1 billion unsecured term loan ("loan"). The loan is expected to have a 10-year term with low interest rates and may be repaid at any time prior to maturity at par. The loan is expected to include approximately 2.6 million warrants issued to the U.S. Department of Treasury. The program also includes certain conditions, such as: prohibitions against involuntary furloughs and reductions in employee pay rates and benefits through September 30, 2020; the elimination of share repurchases and dividends until September 30, 2021; and limits on executive compensation until March 24, 2022.
Sources: Airlines for America (A4A), Alaska Airlines, Southwest Airlines Co.