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 COVID-19 pandemic.
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 market value.
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.
American Airlines LONG (Buy)
ENTER AT: 12.41