American Airlines secures US$5.5 billion Treasury loan, could tap more

American Airlines secures US$5.5 billion Treasury loan, could tap more

American Airlines said on Friday it has secured a US$5.5 billion government loan and could tap up to US$2 billion more in October depending on how the U.S. Treasury allocates extra funds under a US$25 billion loan package for airlines.

FILE PHOTO: People walk past an American Airlines logo at John F. Kennedy (JFK) airport in in New Y
FILE PHOTO: People walk past an American Airlines logo at John F. Kennedy (JFK) airport in in New York

CHICAGO/WASHINGTON: American Airlines said on Friday it has secured a US$5.5 billion government loan and could tap up to US$2 billion more in October depending on how the U.S. Treasury allocates extra funds under a US$25 billion loan package for airlines.

Airlines have until Sept. 30 to decide whether to take the U.S. Treasury loans, which were authorized under the CARES Act coronavirus relief bill passed by Congress in March.

American Airlines was originally allocated US$4.75 billion, but carriers including Delta Air Lines and Southwest Airlines have already said they do not intend to take their share of the package, opening the door for the funds to be used by other airlines.

Fort Worth, Texas-based American said it has already drawn down US$550 million of the Treasury loan, which is backed by its loyalty program. The loans also require airlines to issue warrants and carry restrictions on executive compensation and buybacks.

Among other carriers, United Airline said this week it will tap the Treasury loans, but it was not clear whether the airline would only seek its US$4.5 billion share or more.

U.S. airlines received a separate US$25 billion in March under the CARES Act primarily in the form of grants to keep employees on payroll through the end of this month and avoid furloughs while the industry battles a deep downturn from the coronavirus pandemic.

The have also tapped capital markets to bolster liquidity, but with passenger traffic still down about 70per cent from pre-pandemic levels, the industry is urging Washington to extend another US$25 billion in payroll support through March, 2021.

American said it has also closed a US$1.2 billion debt offering with Goldman Sachs, backed by some intellectual property and airport slots.

(Reporting by Tracy Rucinski and David Shepardson; Editing by Tom Brown)

Source: Reuters

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