US lawmakers nearing deal for massive aviation sector bailout - sources

US lawmakers nearing deal for massive aviation sector bailout - sources

U.S. lawmakers are nearing agreement on a package of grants for passenger and cargo airlines and contractors worth US$32 billion as part of a massive U.S. stimulus and rescue package amid the massive travel demand falloff because of the coronavirus outbreak, three people briefed on the matter said.

FILE PHOTO: American Airlines passenger planes crowd a runway in Tulsa
FILE PHOTO: American Airlines passenger planes crowd a runway where they are parked due to flight reductions made to slow the spread of coronavirus disease (COVID-19), at Tulsa International Airport in Tulsa, Oklahoma, U.S. March 23, 2020. REUTERS/Nick Oxford/File Photo

WASHINGTON/CHICAGO: U.S. lawmakers are nearing agreement on a US$61 billion rescue package for the aviation sector that would include US$25 billion in payroll grants for passenger airlines weathering a sharp falloff in travel demand amid rising coronavirus outbreaks, three people briefed on the matter said.

The deal, which still needs final approval from lawmakers, is also expected to include US$4 billion in grants for cargo carriers and US$3 billion for contractors like caterers to cover payroll costs, as well as another US$29 billion in loans.

The package follows a forceful push by airlines and unions that any aid include grants, rather than just loans as in a preliminary Republican proposal envisioned over the weekend.

Airlines have warned that without cash grants they could be forced to lay off hundreds of thousands of people as U.S. travel demand has collapsed, leaving the airlines without trained staff to jump-start their operations, and the economy, once demand returns.

The aviation package would be part of a US$2 trillion U.S. coronavirus economic stimulus package that lawmakers have been debating.

Airline finances have become increasingly stretched as planes fly nearly empty and more people cancel flights than book new ones. S&P downgraded Delta Air Lines' credit rating to junk on Tuesday.

"The action by S&P underscores the need for swift relief for airline employees that is currently being considered by the government," a Delta spokesman said.

Airlines' argument that grants rather than loans were essential to keep workers on the payroll won the strong backing of House Democrats, who proposed US$40 billion in cash grants on Monday.

In a last-ditch effort, airlines offered to keep all workers on board until at least Aug. 31 if they received the grants. That date may be extended by a month in the final bill, said one of the three people familiar with the matter.

Airlines previously agreed to forgo stock buybacks and dividends and limit executive compensation if they won cash grants. It is unclear if U.S. Treasury will be able to demand equity as a condition of the assistance.

U.S. airline stocks were up sharply on Tuesday afternoon on optimism a deal was near. American Airlines Group Inc shares were up 30per cent at US$13.32, Delta Air Lines jumped 15.8per cent, United Airlines rose 20.4per cent and JetBlue Airways Corp was up 27.7per cent.

Other airlines around the world, contemplating months without flying, have also said they need the support of their governments to survive.

(Reporting by David Shepardson in Washington and Tracy Rucinski in Chicago; Editing by Sandra Maler and Matthew Lewis)

Source: Reuters

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