Airline reps chafe at possibly getting less bailout cash

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Airline reps chafe at possibly getting less bailout cash
Photo Credit: Karen Roach/Shutterstock.com

Airline industry representatives are chafing at a reported Treasury Department proposal to turn a portion of the payroll grants authorized in the Cares Act Covid-19 stimulus into low-interest loans. 

“This is absolutely stealing from the money Congress allocated directly to workers,” Sara Nelson, president of the Association of Flight Attendants-CWA, tweeted on Saturday. 

Under the Cares Act, U.S. passenger airlines are to receive up to $25 billion in grants. The Treasury Department announced Friday that more than 230 airlines had applied for the grants and that any airline that is to receive up to $100 million will get the money without having to provide any equity stake to the government. 

Conditions will be tougher for the largest U.S. airlines, the department suggested. 

“Treasury is currently working with 12 passenger air carriers whose allocated payments would be expected to exceed $100 million to secure appropriate financial instruments to compensate taxpayers,” Treasury said, without adding details. 

However, Reuters reported that Treasury Secretary Steve Mnuchin had informed CEOs of those carriers that the department would provide only 70% of their aid in the form of grants, while 30% would be distributed as low-interest loans. 

Airlines would have to back the loans with warrants, which would give the government the right to buy equity at a set price equal to 10% of the value of the loan, Reuters said. 

For example, an airline receiving $1 billion in aid would receive $700 million in the form of grants and $300 million in loans, with the government getting the right to take a $30 million stake in the carrier. 

Along with sharp criticism from Nelson, whose union represents the flight attendants of nearly 20 U.S. airlines, the proposal has drawn more diplomatically worded consternation from trade group Airlines for America (A4A). 

In a statement Monday, A4A said that U.S. airlines are burning through $10 billion to $12 billion per month, despite numerous cost-cutting measures, as air travel has dropped to its lowest rate since 1954.  

“We were pleased that the Cares Act included direct payroll assistance provisions (in the form of pass-through monies) which were designed specifically to provide immediate financial relief that is necessary to continue funding the payrolls of U.S. airlines,” A4A said, noting that the industry employs 750,000 workers. “Direct payroll assistance funding in the form of grants only is considerably more effective for our employees rather than a hybrid combination of instruments. This federal relief is critical to getting our employees paid and preventing furloughs right now, especially as our country is experiencing historically high unemployment claims.”

The Cares Act stipulates that airlines that take federal grants must refrain from furloughing or laying off non-executive employees through Sept. 30. The bill separately provides for up to $25 billion in grants for airlines and up to $25 billion in loans. 

Nelson questioned whether it’s even legal for the Treasury Department to turn funds awarded under the grant portion of the bill into loans.   

“There’s no doubt it’s against the spirit of the bipartisan bill, if not outright in violation of the Cares Act itself,” she tweeted.

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