American Airlines to receive the majority share of U.S. government aid

Five major U.S. carriers have received the majority share of federal aid that United States Treasury Secretary Steven Mnuchin has approved in the past six weeks. This is as the industry copes with an economy stifled by the impacts of the COVID-19 pandemic.

An American Airlines Boeing 777-300ER. Photo by Cole McAndrew | AeroNewsX

American Airlines (IATA: AA) is set to be the biggest recipient, getting a whopping US$5.8 billion in payroll assistance from the federal government, according to details the Treasury Department released on Tuesday, May 12th. The agency posted a table listing the participants and some loan details for its airlines payroll assistance program on its website.

The abbreviated, textualized list for the biggest and most notable airline groups is as follows: American Airlines $5.8 billion, Delta $5.4 billion, United $5.0 billion, Southwest $3.3 billion, Alaska $992.2 million, Jetblue $935.8 million, Skywest $438 million, Spirit $334.7 million, Hawaiian $292.5 million, and Allegiant with $171.9 million.

Treasury Secretary Mnuchin has approved a total of $25 billion in payroll assistance for 352 applicants, which includes contractors, passenger and cargo carriers, amongst other air-carrier operations, the Treasury said in a statement.

The data posted is as of April 27, 2020, and accounts for about $23 billion that has been disbursed from the $35 billion set aside for payroll support. The program, part of the $2.2 trillion stimulus passed by Congress, is intended to keep employees at passenger carriers, cargo hauler and airline contractors on the job. Most of that money was disbursed within a one-week period last month. According to an agency spokeswoman, an additional $2 billion has been committed for use since the end of April.

“Treasury is committed to the highest standards of public transparency as we provide this critical relief,” Mnuchin said in a statement.

Major U.S. airlines, already reeling from a decline that saw a 95% drop in passenger numbers, absorbed another heavy blow this month when Warren Buffett said that his company, Berkshire Hathaway Inc. had exited its stakes. The billionaire investor had taken stock positions in American, Delta, United and Southwest in 2016, after years of consolidation left the companies poised to produce steady profits and returns for shareholders.

Now, with the pandemic keeping passengers at home and away from the airports, air traffic is expected to take as long as three years to recover to the 2019 pre-coronavirus levels.

“The airline business - and I may be wrong and I hope I’m wrong - but I think it’s changed in a very major way,” Buffett said on May 2. “The future is much less clear to me.”

A Southwest Airlines Boeing 737. Photo by Matt Lino | AeroNewsX

A Standard & Poor’s index of big U.S. carriers tumbled 63% this year through Tuesday - the second-worst decline among industry groups on the S&P 500 index.

Many airline executives have expressed their own dread for having to furlough employees, however they see it as a necessary evil to prevent the airline from toppling over and going bankrupt. Some of the biggest legacy carriers in the United States are losing millions of dollars every single day in operational and payroll expenses alone, even with the government aid, and many employees volunteering to take VLOAs, or Voluntary (unpaid) Leaves Of Absences.

The Treasury Department has said airlines can still use the payroll-support funds after Oct. 1, even if they commence job cuts and furloughs.

The Treasury also pointed out that an additional 260 small passenger airline operations were also approved for loans, with some of the smallest amounts being around $50,000 for companies such as Jannus Air in Florida, and Valley Air Service, in Illinois.

Under the aid law, airlines’ grants were based upon their 2019 payrolls and cover about two thirds of employee expenses.

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