The newest iteration of federal relief in the wake of the coronavirus pandemic would include $58 billion in collateralized loans but no grants to U.S. airlines.
The Senate stimulus bill provides more than the $50 billion in loans that Treasury Secretary Steven Mnuchin had proposed, but, by omitting the direct grant relief requested, falls short what Airlines for America, a leading industry group, requested.
“We are not bailing out the airlines or other industries — period,” said Senate Appropriations Chairman Richard C. Shelby, R-Ala. “Instead, we are allowing the Treasury Secretary to make or guarantee collateralized loans to industries whose operations the coronavirus outbreak has jeopardized.”
Shelby said the approach “strikes an appropriate balance between providing assistance and protecting taxpayers.”
Up to $50 billion would be made available to passenger air carriers while up to $8 billion would go to cargo air carriers. An additional $150 billion in loans would be available for other, unspecified entities, defined as businesses for which credit is not otherwise reasonably available.
The bill’s language makes it clear that a business is eligible for a loan if Treasury determines its operations are in jeopardy because of the pandemic.
In a memo earlier this week, the airline industry group said passenger carriers need $25 billion in immediate grant assistance to compensate for reduced liquidity. The association has requested $4 billion for immediate grant assistance to cargo carriers.
The group sought an additional $25 billion in zero-interest loans and loan guarantees for passenger airlines, with an additional $4 billion in equivalent loans and loan guarantees for cargo airlines.
And it sought tax relief from their 2020 excise taxes and for taxes on tickets, cargo and fuel through December 2021.
Still, the figure dwarfs the relief given to airlines after 9/11, when they asked for $24 billion and got $15 billion, including $10 billion in loans and grants.
The Senate bill bars Mnuchin from using any of the money for grants or direct cash payments — a move that will frustrate the airline industry, which sent a letter Thursday urging lawmakers to include “immediate relief” in the form of grants as well as loans.
The letter, signed by 30 groups including Airlines for America, Travel Tech Association, and the Aircraft Owners and Pilots Association warned that the industry already faces “legitimate liquidity concerns and questions about our ability to meet ongoing debt obligations.”
“The crisis hit a previously robust, healthy industry at lightning speed, and the government response needs to be just as swift, in order to save it.”
But lawmakers have worried about the optics of providing a direct bailout, with Democrats concerned about consumer and worker protections and Republicans, including Sen. Josh Hawley, R-Mo., worried about “a straight bailout.”
The bill also includes a provision barring loan recipients from increasing compensation for or providing golden parachutes to executives over a two-year period from enactment.
That provision was a response to worries about aid going toward shareholders or executive compensation.
Among those who expressed concern about the practice was President Donald Trump, who signaled he was opposed to such a notion. “I would tell them not to,” he said.
The bill did not appear to directly address airports, which have asked for $10 billion, nor did it appear to address the troubled aircraft manufacturer Boeing, which has asked for $60 billion in the wake of the crisis. The aircraft manufacturer has floundered since two Boeing 737 Max accidents that killed 346 people, and the FAA recommended fines of nearly $20 million earlier this month for installing equipment in that aircraft and others without approval. In comments earlier this week, President Donald Trump vowed to protect the company.
But Boeing’s decision to seek federal assistance spurred former U.N. Ambassador Nikki Haley, a Boeing board member, to resign Thursday.
“I cannot support a move to lean on the federal government for a stimulus or bailout that prioritizes our company over others and relies on taxpayers to guarantee our financial position,” she wrote in her resignation letter released by Boeing.
“The board and executive team are going in a direction I cannot support,” she wrote.