The US Treasury will give government loans to help airlines.
The United States Treasury said Thursday that it has agreed to the terms of the government loans to five United States airlines, including American Airlines (NASDAQ: AAL) Group Inc.
The Treasury said it had signed letters of intent with American, Frontier Airlines, Hawaiian Airlines, SkyWest Airlines, and Spirit Airlines under a $ 25 billion emergency loan program approved by Congress in March.
American said Thursday it expects to close a $ 4.75 billion Treasury loan in the third quarter, in addition to the $ 5.8 billion in payroll aid it was previously awarded.
American Chief Executive Doug Parker and President Robert Isom warned employees Thursday that they could face significant over-staffing when trying to secure voluntary casualties.
“Currently, we anticipate having between 20% and 30% – or more than 20,000 – more team members on the payroll than we need to run our program this fall,” they wrote in a memo to employees.
“To be clear, this does not mean that 20,000 members of our team will be laid off in October, it simply means that we still have work to do to align our equipment to the airline we will operate.”
The Treasury separately awarded airlines $ 25 billion in payroll aid bailouts, most of which in the form of grants that do not need to be repaid.
Treasury Secretary Steven Mnuchin said “talks with other airlines continue, and we hope to finalize the deals as soon as possible.” The airlines have until September 30 to decide whether to accept the loan.
Like payroll assistance funds, loans come with a prohibition on share buybacks and dividend payments and set limits on executive compensation.