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
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
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
“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
“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.