American, Delta, United among first applicants for coronavirus aid
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Many U.S. airlines submitted applications for the $25 billion in grants available to airlines under the government’s CARES Act that aims to offset some of the economic toll the novel coronavirus pandemic has taken on the industry.
Alaska Airlines, American Airlines, regional Cape Air, Delta Air Lines, Hawaiian Airlines, JetBlue Airways, Southwest Airlines, Spirit Airlines and United Airlines were among the first to apply for the funds that can be used for employee payroll and benefits on Friday, the companies confirmed. None of the airlines indicated whether they had applied for the $25 billion in loans that are also available from the government.
“This law keeps paychecks coming and it buys us time,” JetBlue CEO Robin Hayes told staff in a memo Friday. “Securing jobs, even at reduced total pay, is my priority right now.”
Airlines around the world are digging into their savings accounts the number of people flying falls to near zero. The International Air Transport Association (IATA) has warned of a cash crunch that could prompt the collapse of half of the world’s carriers if governments do not intervene.
JetBlue is burning around $10 million in cash a day and Delta roughly $60 million the airlines have said. Both have cut capacity by at least 70% in April to slow the bleeding, and sought new debt from lenders to bolster balance sheets.
For U.S. airlines, the CARES Act funds are a “game extender,” as Evercore analyst Duane Pfennigwerth put it in March. The grants are earmarked for non-executive compensation while the loans can be used for other fixed costs. All of the funds come with strings, including barring involuntary furloughs through Sept. 30, requiring that air service continues across the country, and limiting investor returns and executive compensation.
Delta CEO Ed Bastian, in his own communique to staff Friday, said the airline is flying roughly 6% of the number of passengers that it flew this time last year. He warned that they “still haven’t seen the bottom.”
The CARES Act “funds alone are not nearly enough. We are expecting our revenue in the second quarter to be down 90 percent,” said Bastian.
The government had set an initial deadline of 5 p.m. ET on Friday for airlines to submit their earliest round of grant requests.
Updated with comments from Alaska Airlines, Hawaiian Airlines, Spirit Airlines and Southwest Airlines.
Feature image courtesy of American Airlines.
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