American and 4 Other Airlines Reach Loan Agreements with Us
American and 4 Other Airlines Reach Loan Agreements with US Treasury Department
In an effort to mitigate the financial impact of the COVID-19 pandemic on the airline industry, American Airlines, Delta Air Lines, Southwest Airlines, United Airlines, and Alaska Airlines have reached loan agreements with the US Treasury Department.
The CARES Act, which was passed earlier this year, allocated up to $25 billion in grants and loans to aid the airline industry. These loans are meant to help airlines make payroll, maintain operations, and uphold critical infrastructure, such as airports.
American Airlines will receive a $5.5 billion loan that includes $4.75 billion in direct loans and an additional $750 million in a secured loan. Delta Air Lines will receive a $5.4 billion loan that includes $3.8 billion in direct loans and an additional $1.6 billion in a secured loan.
Southwest Airlines will receive a $3.2 billion loan, which includes $2.3 billion in direct loans and an additional $919 million in a secured loan. United Airlines will receive a $5 billion loan, which includes $3.5 billion in direct loans and an additional $1.5 billion in a secured loan.
Alaska Airlines, owned by Alaska Air Group, will receive a $1.2 billion loan that includes $851 million in a secured loan and $352 million in an unsecured loan.
The terms of the loans include restrictions on share buybacks, dividends, and executive compensation, as well as requirements for airlines to maintain a certain level of service to certain markets.
In exchange for the loans, the airlines will issue warrants to the US Treasury Department, giving them the option to purchase a certain number of shares of the airline`s stock at a specific price. This allows the government to benefit from any potential future growth in the airline industry.
The loan agreements come at a critical time for the airline industry as air travel demand has plummeted due to the pandemic. While some airlines have received criticism for their handling of the crisis, these loans are a necessary step towards ensuring the future survival and stability of the industry.
Overall, the loan agreements are a significant move towards addressing the financial challenges caused by the pandemic. However, they are only a temporary solution, and the industry will still have to navigate ongoing changes and uncertainties in the months and years to come.
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