Airlines Stocks Surge
After Most Reach Tentative Bailout Deal With Treasury
Major carriers accept
billions in support to help cover payrolls through September.
Shares of U.S.
airlines jumped in after-hours trading Tuesday after the companies reached a
tentative agreement with the U.S. government to cover payroll expenses through September
in a $25 billion bailout deal.
The airline industry
has been crushed in recent weeks by the collapse in air travel caused by the
The U.S. Treasury
Department said on Tuesday that major passenger airlines have agreed in principle
to a $25 billion (19.8 billion pounds) rescue package, ensuring airline workers
have jobs until October while the industry battles its biggest-ever crisis.
Airlines are hopeful
that U.S. passenger traffic, which has dropped by 95% due to the coronavirus
pandemic, will begin to recover by October but have warned that the slowdown in
air travel could extend into next year and even longer. They may need another
round of government bailouts to survive.
Major carriers will
receive 70% of the funds for payroll in cash assistance that will not need to
be paid back, while smaller carriers receiving $100 million or less will not
need to repay any funds.
The six largest U.S.
airlines – American Airlines Group Inc, United Airlines Holdings Inc, Delta Air
Lines Inc, Southwest Airlines Co, JetBlue Airways Corp, and Alaska Airlines –
as well as four other airlines, accepted the support, Treasury said.
Agreements should be
finalized soon and funds disbursed quickly, it said.
Carriers were told
they could apply for the total salaries and benefits paid in the second and
third quarters of 2019, an amount that surpasses American Airlines’ current
Under the terms laid
out by Treasury officials last week, the government would receive repayment on
30% of the funds awarded to large carriers and warrants equal to 10% of the
loan amount that was priced at last week’s close.
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