U.S. airlines cheer government relief but warn it is no 'cure' for deep industry crisis

[March 28, 2020]  By Tracy Rucinski

CHICAGO (Reuters) - United Airlines Holdings Inc and Delta Air Lines welcomed on Friday a $50 billion relief package they said would protect jobs through September but warned that the continued challenges facing the industry will require more action.

Airlines are weathering their largest ever downturn as the coronavirus has ground global travel to a halt. A massive government stimulus package passed on Friday gives airlines some breathing room in terms of managing costs, but they still face tough decisions in the months ahead.

"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," United said in a memo to employees.

Based on projections for the spread of the coronavirus and the global economy's reaction, Chief Executive Oscar Munoz and President Scott Kirby said they expect "demand to remain suppressed for months after that, possibly into next year."

Delta CEO Ed Bastian told employees that the relief package was not "a cure" and urged workers to continue signing up for voluntary unpaid leaves of absence.

U.S. airlines are set to receive $25 billion in grants to cover payrolls over the next six months, but are still encouraging workweek reductions, unpaid leaves and early retirements to further cut costs as they face more cancellations than bookings.

Before the global crisis, U.S. airlines were transporting a record 2.5 million passengers a day. Now planes are only 10% to 20% full and new bookings are showing 80% to 90% declines in traffic even after dramatic cuts in capacity, industry lobby Airlines for America said.

Airlines say the situation is dramatically different from just four weeks ago and getting worse each day with no end in sight. All are planning continued capacity reductions into the summer.

Delta Air Lines passenger planes are seen parked due to flight reductions made to slow the spread of coronavirus disease (COVID-19), at Birmingham-Shuttlesworth International Airport in Birmingham, Alabama, U.S. March 25, 2020. REUTERS/Elijah Nouvelage

Unions representing pilots and flight attendants also welcomed the bill but said challenges remain in implementing it.

EQUITY STAKES

In exchange for the $25 billion in direct grants, U.S. Treasury Secretary Steve Mnuchin can demand equity, warrants or other financial instruments, a prospect that caused some frustration for airlines as the deal was reaching the finish line this week, people familiar with the matter said.

Airlines expect to learn the terms of the aid in the next five to 10 days, senior United executives said, and trust they will not be so onerous that airlines would not apply.

The industry directly supports 750,000 jobs and has argued that it must have the financial ability to jump-start operations once demand starts to return.

The leaders of American Airlines Group Inc, which has the largest workforce of any U.S. carrier, said late Thursday that they had not decided to apply for federal funds, noting that the terms were still unclear.

Still, Mnuchin insisted on Friday that taxpayers would be compensated. "I've been very clear this is not an airline bailout," he told Fox Business Network.

(Reporting by Tracy Rucinski, David Shepardson; Editing by Sandra Maler, Richard Chang and Diane Craft)

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