Get all the latest news on coronavirus and more delivered daily to your inbox. Sign up here.
The U.S. Treasury Department and the major U.S. airlines are hammering out the specifics of the $25 billion coronavirus relief package with the Treasury expecting to hear from the airlines within days, if not hours, about their positions regarding the specifics of the relief package.
|AAL||AMERICAN AIRLINES GROUP, INC.||21.46||-0.62||-2.81%|
|UAL||UNITED AIRLINES HOLDINGS, INC.||48.65||-0.81||-1.64%|
|DAL||DELTA AIR LINES, INC.||40.96||-0.71||-1.70%|
|LUV||SOUTHWEST AIRLINES CO.||51.15||-0.63||-1.22%|
A part of the discussion involves the equity stake the federal government could exercise as a part of the $25 billion allocated to help the airlines. Treasury is taking the position that the CARES Act allows them to get warrants, options, preferred stock, debt, securities, notes or other financial instruments as compensation to the taxpayers and is drawing the line at what is described as a direct federal benefit.
If taxpayer money is being used to keep someone from tapping into unemployment benefits or saving their job (which means there will be payroll taxes), for example, that is considered a direct federal benefit. The other pot of money is where Treasury could exercise its option.
“We have determined what portion of the payments we think does not represent a direct benefit to federal taxpayers, and for that amount, we are seeking compensation,” Brent McIntosh, the under secretary of the Treasury for International Affairs, tells FOX Business.
However, the association representing the major airliners, Airlines for America, says that the money given to the airlines should not have strings attached. “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,” Airlines for America said in a statement.
The Treasury Department has not yet released the exact terms regarding equity or if any airlines have agreed to the structure. However, McIntosh says there is a desire to come to an agreement as soon as possible.
“We all want to resolve this within days, and the carriers and we are both acting with that urgency in mind so that we can get money out to the workers who need it,” he says.