Please ensure Javascript is enabled for purposes of website accessibility

Airlines Reach Deal with Treasury on Bailout Terms

By Lou Whiteman - Apr 14, 2020 at 5:48PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The funding allows time for air traffic to return post-pandemic.

U.S. airlines and negotiators from the Treasury Department have reportedly resolved their differences and have an agreement on the terms of an aid package, giving the industry months of runway to wait for passengers to return following the COVID-19 pandemic.

The industry won $50 billion in support as part of a $2 trillion economic stimulus plan passed through Congress late last month, but the legislation gave Treasury broad discretion when considering how the aid will be distributed and what will be required in return. Airline shares fell on Monday after weekend reports indicated the airlines were balking at the terms Treasury was demanding, but according to the Wall Street Journal those differences have now been resolved.

An airplane landing at night.

Image source: Getty Images.

Treasury was reportedly seeking to convert about 30% of the $25 billion in grants designed to help the airlines meet payroll and avoid layoffs into low-interest loans. The airlines countered that the total would not be enough to support full payroll, given the industry has grounded thousands of jets and cut more than two-thirds of flights.

The need for aid spans the entire industry. For example, Delta Air Lines (DAL 5.55%), an industry leader coming into the downturn, has said it expects revenue to be down more than 90% year over year in the second quarter.

Final terms of the agreement have not been released, but Treasury officials were adamant earlier in the day Tuesday that they would not back down from their requirements. The negotiations were high-risk for both sides, as the airlines need the funding to avoid liquidity issues but the government doesn't want to see more layoffs or furloughs at a time when jobless claims are skyrocketing.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Delta Air Lines, Inc. Stock Quote
Delta Air Lines, Inc.
DAL
$31.20 (5.55%) $1.64

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
321%
 
S&P 500 Returns
111%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.