Senate GOP virus bill aids U.S. transport sector; offers airlines loans,
Send a link to a friend
[March 23, 2020]
By David Shepardson and Tracy Rucinski
WASHINGTON/CHICAGO (Reuters) - A Senate
Republican coronavirus stimulus package would provide financial aid to
U.S. airports, transit systems and passenger railroad Amtrak, but $50
billion for struggling U.S. airlines would be a loan, not a cash payout,
the proposal showed.
The Senate is expected to vote on Monday whether to advance the measure
after Democrats block action on Sunday.
A copy of the proposal seen by Reuters showed it would set aside grants
of $10 billion for airports, $20 billion for transit systems and about
$1 billion for Amtrak.
Amtrak and transit systems have warned of massive losses as they grapple
with a dramatic fall in users, by 90% in some places, with tens of
millions of Americans ordered to shelter in place, while others
voluntarily work from home in a bid to slow the spread of the highly
Amtrak has slashed service, while airports say they will lose at least
$13.9 billion in 2020 and warn some could default on bond obligations.
The nearly 600-page proposal provides up to $50 billion in loans or loan
guarantees to passenger airlines and $8 billion to cargo carriers.
It also provides $17 billion for businesses "critical to maintaining
national security." Up to $425 billion more is set aside for loans to
other businesses hit by the pandemic as well as states and cities.
Airlines and others would have to maintain employment levels "to the
extent practicable" while they had unpaid loans.
"Direct financial assistance is needed immediately – other forms of
liquidity are rapidly evaporating," a spokeswoman for Airlines for
America, a trade body representing major U.S. passenger and cargo
carriers, said on Sunday.
On Saturday, airlines made a last-ditch effort to try to get a cash
infusion, calling for cash grants of $29 billion out of the $58 billion
Republican lawmakers continued talks on Sunday to reach a deal with
congressional Democrats, as some airline unions sought to convince
lawmakers to reverse course.
Airlines had offered not to make any job cuts through Aug. 31 if they
won the cash and to accept curbs on executive pay and forgo paying
dividends or stock buybacks.
In a note, analysts at JPMorgan analysts argued cash aid could "soothe
rattled credit markets" and reduce collateral damage to balance sheets
and labor, while collateralized loans could hinder airlines’ ability to
raise additional capital.
[to top of second column]
A passenger wearing a mask sits next to an airpot information
screens as the Federal Aviation Administration (FAA) said it
temporarily halted flights arriving at New York City airports and
Philadelphia on Saturday after a trainee at the New York Air Route
Traffic Control Center tested positive for coronavirus disease
(COVID-19), at Miami International Airport, Miami, Florida, U.S.,
March 21, 2020. REUTERS/Carlos Barria
In the future, investors may demand airlines establish more
fortress-like balance sheets, the note said.
"To suggest that the airlines should have better prepared for this
environment seems akin to suggesting Pompeii should have invested
more heavily in firefighting technology," the analysts added.
The global coronavirus outbreak has forced airlines to cancel tens
of thousands of flights and caused massive revenue losses.
"Time is running out," a group of airlines that included United
Airlines <UAL.O>, Delta Air Lines <DAL.N>, American Airlines Group <AAL.O>,
FedEx Corp <FDX.N>, Southwest Airlines Co <LUV.N>, UPS <UPS.N>
warned on Saturday.
Pilot unions said on Sunday they were urging members to write to
Congress to request grants, while the Association of Flight
Attendants said it was asking members to write, call or tweet
seeking direct relief in the form of grants for payroll.
The bill would give the U.S. Transportation Department the power to
require carriers to maintain scheduled air service and impose curbs
on executive compensation for companies receiving government loans
for two years.
The loans would be for a maximum of five years. Airlines would be
barred from stock buybacks or dividends.
The Treasury Department could receive warrants, stock, options or
other equity instruments as part of government loans but could not
exercise voting power on any shares it acquired. Democratic aides
criticizes the ban on stock buybacks in the bill, saying it could be
waived by Treasury.
The bill also waives some aviation excise taxes, which would boost
airlines. Boeing Co <BA.N> had sought at least $60 billion in loan
guarantees for the aviation manufacturing sector, but it appears the
industry could simply seek loans from the $425 billion fund.
Senator Ted Cruz said on Saturday some were "pushing for a special
carve-out just for Boeing & GE," but on Sunday, General Electric <GE.N>
said it had not sought any provision that would benefit it
(Reporting by David Shepardson and Tracy Rusinski; Editing by Bill
Berkrot and Clarence Fernandez)
[© 2020 Thomson Reuters. All rights
Copyright 2020 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content.