Coronavirus: The $50 billion US airline bailout, unpacked

Apr 8, 2020

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Airlines are getting a $50 billion chunk of the $2 trillion bailout bill passed in late March to help the U.S. economy withstand the impact of the COVID-19 pandemic. That sum includes $25 billion in loans and loan guarantees from the federal government, and another 25 billion in grants.

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It’s meant to be a lifeline to keep airlines — and not just airlines, but a lot of the aviation industry — afloat during the crisis. One thing it is not: free money with no strings attached.

In this video, TPG Senior News Editor Clint Henderson explains the conditions airlines have to meet to get the money. For example, there can be no buybacks of shares until one year after loans are repaid. Airlines must also maintain a level of service between cities; the government has a preeminent interest in keeping the country connected, and the CARES Act is partly intended to do just that.

Labor is also a big part of the aid package. Airlines can use government grants to pay their salaries, since their revenue has dipped to almost zero. They must however guarantee that they will keep people employed, paid and with benefits until September 30.

Related: TPG founder and CEO Brian Kelly on travel post-coronavirus

To deal with the drop in revenue while still having to cover fixed costs like airplane leases, airlines are also parking some of their older planes — the ones that consume more fuel and emit more pollutants. That’s why, as a consequence of the crisis, they will end up with smaller and greener fleets than before the coronavirus hit.

Watch our video for an easy-to-understand breakdown of this very complex piece of legislation:

Related: Everything you need to know about the deadly coronavirus

Related: A letter to our readers about coronavirus from The Points Guy founder and CEO Brian Kelly

Visit TPG’s guide to all coronavirus news and updates

Featured image by Alberto Riva/The Points Guy 

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