WASHINGTON/CHICAGO (Reuters) – U.S. Treasury Secretary Steven Mnuchin told major airlines on Friday he wants them to repay some of the $25 billion in cash grants the U.S. Congress approved last month to cover payroll costs, three industry officials briefed on the matter told Reuters.
FILE PHOTO: A flight attendant waits for the departure of a one-passenger flight between Washington and New Orleans as the spread of coronavirus disease (COVID-19) continues, in Washington, U.S., April 3, 2020. Picture taken April 3, 2020. REUTERS/Carlos Barria/File Photo
Mnuchin spoke with the chief executives of major airlines in separate calls on Friday and told them the department was offering 70% of the aid in grants that would not need to be repaid, and 30 percent in low-interest loans for which the airlines would be required to offer warrants, the sources said.
Regional carriers receiving $100 million or less will not need to grant warrants to the government and it is not clear if they would need to repay any of the funds.
Treasury did not immediately comment.
Airlines were told they could apply for the amount they paid in salaries and benefits in second and third quarters of 2019. American Airlines Group Inc, with the largest number of employees, had said it was seeking around $6 billion.
A United Airlines Holdings Inc spokesman said the company was reviewing the details of Treasury’s proposal. American Airlines also confirmed it was reviewing the proposal.
Airline boards and officials plan to review the proposals all weekend and it is not clear if they will accept the terms or propose a counteroffer.
U.S. President Donald Trump had said airlines would receive details this weekend about the terms of a $32 billion payroll grant package meant to offset the impact of the coronavirus outbreak.
“We have a great plan for the airlines. We’ve got to keep the airlines going. You know it’s never been a great business but it’s a very vital business for the country,” Trump said on Friday.
Under the $2.3 trillion CARES Act, passenger airlines are eligible for $25 billion in cash grants for payroll while cargo carriers can get $4 billion and airport contractors like caterers and airplane cleaners $3 billion.
Reuters reported on Thursday that the six largest U.S. airlines — American Airlines, United Airlines, Delta Air Lines Southwest Airlines Co, JetBlue Airways Corp and Alaska Airlines — are expected to get around 90% of the $25 billion package.
Smaller regional carriers were set to receive under $100 million each but would not have any equity requirements, sources said earlier on Friday.
Treasury received some 275 applications for the payroll grants, sources said.
Airlines say they are suffering the worst crisis of their history as travel demand has dwindled to less than 5% of normal levels. Several major U.S. airlines filed for Chapter 11 bankruptcy protection from creditors after the Sept. 11, 2001 attacks or the 2009 financial crisis.
Reporting by David Shepardson and Tracy Rucinski; Additional reporting by Tim Hepher and David Lawder; Editing by Sandra Maler