U.S. carriers have reached agreements for aid they will receive under the federal government's Covid-19 relief stimulus package, approved last month.
Carriers that have reached agreements, for which the final terms will be issued later this week, will receive about 76 percent of their payroll based on actual payrolls of the second and third quarter of 2019, according to a research note from Cowen analyst Helane Becker. The money is broken down into 70 percent as grants and 30 percent as loans, and carriers will create warrants through which the government can buy stock equivalent to 10 percent of the loan portion of the money, Becker said.
"The approved grant amount was lower than we anticipated on an airline by airline basis, indicating a high participation rate," according to Becker. "U.S. carriers requested more than $25 billion in total, so each disbursement was scaled down."
American Airlines will receive $5.8 billion in payroll support from the package, including a $4.1 billion direct grant and a low-interest loan of $1.7 billion. American also plans to apply for a loan of about $4.75 billion from the U.S. Treasury.
Under the terms of the agreement, American has agreed not to implement involuntary furloughs or pay reductions through Sept. 30. It also agreed to limitations on stock buybacks, dividends and executive compensation, according to the carrier.
Delta's agreement with the U.S. Treasury is for $5.4 billion in payroll support, $1.6 billion of which will be a 10-year low interest loan, CEO Ed Bastian said in a letter to employees. The government also will receive warrants to acquire about 1 percent of Delta stock over five years at $24.39 per share.
The carrier has had about 35,000 voluntary leaves of absence amid the pandemic, but the funding will prevent furloughs and pay reductions, Bastian said. The carrier also raised more than $3 billion in cash during the first quarter, he said.
"These steps, taken together, are vital to protecting Delta's future over the next several months as we operate a minimal schedule to provide essential services for those who must travel," Bastian wrote.
Southwest Airlines has reached an agreement for $3.2 billion from the program, including $2.3 billion in direct payroll support and a loan of about $1 billion. Besides agreeing to no involuntary furloughs or pay reductions through Sept. 30, participation also includes a prohibition on share repurchases and dividends until Sept. 30, 2021 and executive compensation limits that last until March 24, 2022, according to the carrier.
JetBlue will receive $935.8 million, with $685.1 million in direct support and $250.7 million in low-interest loans. The total represents 76 percent of its payroll for the second and third quarters. The U.S. government also is receiving a limited number of warrants, the rights to buy shares of JetBlue.
Alaska Airlines and Horizon Air will receive $992 million from the act to cover payroll and benefits, $267 million of which is a loan. Under the terms, the government will get the right to buy 847,000 non-voting shares of Alaska Air Group at $31.61 per share. The carriers plan to apply for an additional loan of $1.128 billion through a separate program in the act, which they will use to meet short-term liquidity needs.
United Airlines had not released details of its agreement as of Tuesday evening, but Becker said the carrier has reached an agreement with the Treasury Department, as have Allegiant, Frontier, Hawaiian and SkyWest. Agreements with Spirit and Mesa are likely to be announced soon, she said.
[Editor's note: This report was updated April 14 with Becker's comments and Alaska Airlines' details.]