Airlines, Treasury Department strike deal for $25 billion bailout
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Many U.S. airlines have struck a deal with the federal government for about $25 billion to help meet payrolls and keep people on payrolls — at least until October. Marketplace’s Nova Safo has the details, explaining “ten major airlines have signed on, including United, Delta, American and Southwest.”
The following is an edited transcript of his conversation with “Marketplace Morning Report” host David Brancaccio.
Nova Safo: Spirit Airlines says it’s still in negotiations with the Treasury Department. The money is coming from the $2 trillion CARES Act that Congress passed last month.
David Brancaccio: There are strings attached, right?
Safo: For one thing, 30% of the money is going to have to be paid back. The Treasury Department will also get stock warrants from the airlines.
Industry consultant Richard Aboulafia, vice president of analysis at Teal Group, says “the idea with a stock warrant is that you can convert it to shares at a certain price. And then, of course, immediately sell their shares at the new higher price once the air travel market recovers, which hopefully will be happening in a year or two.”
So the federal government could stand to recoup some of the money it’s spending now.
Brancaccio: I understand not everyone is happy about this deal. Why is that?
Safo: Unions representing flight attendants and pilots both said that while they’re grateful for the aid, they’re concerned about the loans the airlines are taking on. They say forcing airlines into taking on the debt will actually make it harder for them to avoid layoffs later. So they’re concerned about the future prospects of this deal.
COVID-19 Economy FAQs
New COVID-19 cases and deaths in the U.S. are on the rise. How are Americans reacting?
Johns Hopkins University reports the seven-day average of new cases hit 68,767 on Sunday — a record — eclipsing the previous record hit in late July during the second, summer wave of infection. A funny thing is happening with consumers though: Even as COVID-19 cases rise, Americans don’t appear to be shying away from stepping indoors to shop or eat or exercise. Morning Consult asked consumers how comfortable they feel going out to eat, to the shopping mall or on a vacation. And their willingness has been rising. Surveys find consumers’ attitudes vary by age and income, and by political affiliation, said Chris Jackson, who heads up polling at Ipsos.
How many people are flying? Has traveled picked up?
Flying is starting to recover to levels the airline industry hasn’t seen in months. The Transportation Security Administration announced on Oct. 19 that it’s screened more than 1 million passengers on a single day — its highest number since March 17. The TSA also screened more than 6 million passengers last week, its highest weekly volume since the start of the COVID-19 pandemic. While travel is improving, the TSA announcement comes amid warnings that the U.S. is in the third wave of the coronavirus. There are now more than 8 million cases in the country, with more than 219,000 deaths.
How are Americans feeling about their finances?
Nearly half of all Americans would have trouble paying for an unexpected $250 bill and a third of Americans have less income than before the pandemic, according to the latest results of our Marketplace-Edison Poll. Also, 6 in 10 Americans think that race has at least some impact on an individual’s long-term financial situation, but Black respondents are much more likely to think that race has a big impact on a person’s long-term financial situation than white or Hispanic/Latinx respondents.
Find the rest of the poll results here, which cover how Americans have been faring financially about six months into the pandemic, race and equity within the workplace and some of the key issues Trump and Biden supporters are concerned about.
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