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US airlines seek at least $50 billion in aid to combat coronavirus crisis

March 16, 2020
3 min read
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US airlines seek at least $50 billion in aid to combat coronavirus crisis
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U.S. passenger airlines are seeking at least $50 billion in financial support from the government amid what many are calling an unprecedented slump in air travel from novel coronavirus pandemic.

Industry body Airlines for America (A4A) has requested the aid through a combination of grants and loans, the organization said Monday. A4A's proposal seeks $25 billion in grants to make up for a shortfall in liquidity — or cash on hand plus access to credit — and $25 billion in unsecured loans or loan guarantees.

In addition, A4A is seeking tax relief for airlines backdated to the beginning of 2020.

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"We're going to back the airlines 100%, it's not their fault, it's nobody's fault," said President Donald Trump on Monday afternoon without addressing A4A's proposal.

Alaska Airlines, American Airlines, Delta Air Lines, Hawaiian Airlines, JetBlue Airways, Southwest Airlines and United Airlines are among A4A's members.

Airlines have seen an unprecedented drop in demand amid the COVID-19 crisis. In a letter to employees on Sunday, United CEO Oscar Munoz and president Scott Kirby said revenues in March alone are on track to be $1.5 billion lower than in 2019. They added that even with plans to halve the size of the airline in April and May, the percent of seats filled could be as low as 20%.

Related: United Airlines cuts capacity by half through at least May

The $50 billion ask aims to help shore up airlines balance sheets for the duration of the COVID-19 crisis. Preserving cash, and having access to credit, is key to the operation of any company and is critical to airlines keeping their doors open for the duration.

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Not everyone thinks U.S. carriers need financial support. In a report earlier on Monday, J.P. Morgan analysts Jamie Baker and Mark Streeter said they "generally prefer the U.S. not interfere with airlines," but at the same time noted some support was likely.

"Governments throughout the world will need to, and in the case of the U.S., will want to, step in," they wrote.

Related: US 'Big 3' well-positioned survive possible coronavirus crisis shakeout

A4A's aid request is not unprecedented though the amount is. After 9/11, the federal government gave airlines $5 billion in grants and tasked the Air Transport Stabilization Board to lend the industry up to another $10 billion. However, only about $1.6 billion was ever lent and the majority went to smaller carriers that no longer exist.

The Trump administration plans to use the post-9/11 airline relief package as a template for what they do in response to the coronavirus, The Wall Street Journal reported Monday.

Many airline leaders have said the drop in demand due to COVID-19 is worse than what they saw after 9/11.

"I'm optimistic we will receive their support," Delta CEO Ed Bastian said on the aid discussions with lawmakers in an employee memo on March 13. "That said, the form and value is unpredictable, and we can't put our company's future at risk waiting on aid from our government."

Related: US airlines could retire older aircraft due to coronavirus downturn

Additional reporting by Zach Wichter.

Featured image by Getty Images