$5.8 Billion payroll support for American Airlines

American Airlines announced on April 14th that the U.S Treasury Department had approved a US$5.8 billion package to the airline from the Payroll Support Programme (PSP). The PSP was created through the Coronavirus Aid, Relief and Economic Security Act, otherwise known as the "CARES" Act.

According to the airline, the funds are targeted to support team member salaries and benefits and will come in two forms. The first will be in the form of a direct grant of US$4.1 billion and a low-interest rate loan of US$1.7 billion. The package forms part of US$25 billion of support for US airlines.

American Airlines Boeing 777-200. Photo by Cole McAndrew | AeroNewsX

American Airlines is the largest airline in the world when measured by the number of aircraft in its fleet. Considering its size, the financial support shows the continued impact of the coronavirus throughout the industry, particularly in lost revenues. IATA has now forecast a global loss of US$314 billion to airlines in lost passenger revenues this year.

American Airlines employs over 100,000 staff worldwide, proving its importance of survival and the support programme helps keep its members on payroll through this depressed period of consumer demand.

The airline commends the support it has received, with Chairman and CEO Doug Parker saying, "The Payroll Support Programme recognises the extraordinary dedication of our entire team, and importantly, sustains the critical air service being provided by our frontline team members." The Chairman wants to be ready for when the world heads back to the skies and is hopeful demand will return by September 2020.

Well over 6,000 flights are served daily to more than 360 destinations by American Airlines, and it is a key player in the United States' connectivity both domestically and internationally. Despite the prediction for the return of demand looking likely to push into next year, this financial package will support American in retaining its staff through to October and assist in its readiness to take to the skies once again.

American trades on NASDAQ; (AAL), where it saw the share price increase by over 6% in response to the relief news. However the airline has also agreed to limitations on stock buybacks, dividends and executive compensation.

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