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US begins aid payments to airlines; American, Delta and United among first recipients

April 21, 2020
4 min read
US begins aid payments to airlines; American, Delta and United among first recipients
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The U.S. government has made the first $2.9 billion in payroll assistance to airlines, beginning the flow of sorely needed funds from the coronavirus pandemic bailout package.

Allegiant Air, American Airlines, Delta Air Lines, Southwest Airlines, Spirit Airlines and United Airlines were among the 56 companies that received their first payments on April 20, according to the Treasury Department. Airlines and other related companies, like ground handling and maintenance firms, are eligible for the funds.

The assistance is part of the more than $50 billion in aid U.S. legislators allocated to airlines as part of the $2 trillion bailout, which is known as the CARES Act. The package includes $25 billion for payroll grants and another $25 billion in loans, both of which come with air service and other strings attached.

Get Coronavirus travel updates. Stay on top of industry impacts, flight cancellations, and more.

Alaska Airlines, Frontier Airlines, Hawaiian Airlines, JetBlue Airways and SkyWest Airlines have also agreed to the terms for the Treasury's payroll aid. They are expected to begin receiving funds shortly.

"Hopefully we will have all the i's dotted and t's crossed today on the payroll [assistance]," JetBlue CEO Robin Hayes told CNBC on Tuesday.

The delay in the federal aid has proved fateful for some. Alaska-based regional carrier RavnAir filed for bankruptcy and shut down on April 5. It cited the delays in getting CARES Act funds among the reasons for closing its doors.

Related: US airlines’ first bailout aid was tougher to get and came with more strings than expected

The payroll assistance also puts off a lot of difficult decisions at airlines. Carriers are required to maintain their workforces at the same pay rates, as well as continue to fly to all of the destinations they served prior to COVID-19 until Sept. 30 as a condition for taking the funds.

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However, airline executives and Wall Street analysts warn that deep cuts are likely to come Oct. 1. Analysts at Cowen have warned that more than 100,000 staff could be furloughed or laid off as airline's work to rightsize their workforces -- and cost structures -- to a market with far fewer people flying.

The latest analyst estimates forecast passenger numbers in the U.S. will be between 25% to 30% lower at year-end than they were at the end of 2019.

Related: US carriers signal slow recovery with United Airlines planning to cut June flying by 90%

Even then, getting travelers back onto planes will require confidence that they will not be exposed to the virus or COVID-19 — something few have answers too yet.

"Once market travel restrictions and lock downs are relaxed, there’s still the question will there be the demand from travelers to come back and fly," said International Air Transport Association (IATA) chief economist Brian Pearce during a briefing Tuesday. “We really do need to see measures that restore passenger confidence.”

In addition to the payroll assistance, at least five U.S. airlines intend to apply for some of the separate $25 billion in loans available under the CARES Act. Alaska, American, Hawaiian, JetBlue and United have indicated they will seek funds though receipt will depend on the terms set by the Treasury.

Related: Could airlines say ‘no thanks’ to payroll aid because of schedule requirements?

Featured image by Alberto Riva

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    The Points Guy Exclusive Offer: Earn 150,000 Membership Rewards® points after you spend $15,000 on eligible purchases with the Business Platinum Card® within the first 3 months of Card Membership.

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  • Annual Fee

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  • Recommended Credit
    Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

    670-850
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Why We Chose It

It's hard to find a card that competes with the mile-long list of benefits that come with the Amex Business Platinum. While it's certainly not the card for the average consumer, a business owner with tons of expenses -- especially related to travel -- will find this card incredibly valuable. This card is similar to the consumer version that Amex offers, but with more business-oriented perks around statement credits and earning rates that are a better fit for business owners.

Pros

  • An up to $100 credit for Global Entry or TSA PreCheck application fee every four to five years
  • Up to $400 annual credit for eligible U.S. Dell purchases (enrollment required)
  • Gold status at Marriott and Hilton hotels (enrollment required)
  • Access to the Fine Hotels & Resorts program and Hotel Collection
  • Extended warranty protection
  • International Airline Program and Cruise Privileges Program

Cons

  • Steep annual fee
  • Difficulty meeting $15,000 welcome offer for smaller businesses
  • Limited high-bonus categories outside of travel
  • The Points Guy Exclusive Offer: Earn 150,000 Membership Rewards® points after you spend $15,000 on eligible purchases with the Business Platinum Card® within the first 3 months of Card Membership.
  • Get 5X Membership Rewards® points on flights and prepaid hotels on amextravel.com, and 1X points for each dollar you spend on eligible purchases.
  • Earn 1.5X points (that’s an extra half point per dollar) on eligible purchases at US construction material & hardware suppliers, electronic goods retailers and software & cloud system providers, and shipping providers, as well as on purchases of $5,000 or more everywhere else, on up to $2 million of these purchases per calendar year.
  • Unlock over $1,000 in annual statement credits on a curation of business purchases, including select purchases made with Dell Technologies, Indeed, Adobe, and U.S. wireless service providers.
  • $200 Airline Fee Credit: Get up to $200 in statement credits per calendar year for checked baggage fees, lounge day passes, and more at one selected airline.
  • $189 CLEAR® Credit: Use your Card and get up to $189 back per year on your CLEAR® membership. CLEAR® is available at more than 50 U.S. airports and stadiums.
  • The American Express Global Lounge Collection® can provide an escape at the airport. With more than 1,400 airport lounges across 140 countries and counting, you have more lounge location options than any other credit card on the market as of 9/2021.
  • $695 Annual Fee.
  • Terms Apply.