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Airline Loan Agreement

“We are pleased to close loans that support this critical industry while ensuring adequate compensation to taxpayers,” Treasury Secretary Steven Mnuchin said in the statement. All major U.S. airlines had previously agreed to a combination of grants and loans to cover labor costs until Sept. 30. These five airlines are the first to provisionally accept loans from a separate $25 billion kitten made available by Congress as part of a $2.2 trillion measure to help businesses affected by the pandemic. American is generally considered the weakest financially of the largest U.S. airlines, since it has sunk into the pandemic with the highest amount of debt. Isom said in May that the airline was considering using its AAdvantage loyalty program as collateral for a federal loan. The airlines received special treatment from Congress and the White House for the virus aid project approved in March. It has provided up to $50 billion in grants, loans and guarantees to passenger airlines and $8 billion to cargo companies.

The measure gave the Department of Finance the power to demand compensation for taxpayers, including in the form of partial shareholdings. Airlines are expected to cut thousands of jobs in October, when federal pay slip assistance expires. Many encourage employees to resign or retire. In addition to American and United, other airlines that have signed credit agreements with President Donald Trump`s administration are Alaska Airlines, Frontier Airlines, JetBlue, Hawaiian Airlines and SkyWest Airlines. The Ministry of Finance said Thursday it had signed memoranda of understanding for new loans to American, Spirit Airlines, Frontier Airlines, Hawaiian Airlines and SkyWest Airlines. They are the first airlines to accept government loans from a $25 billion pool under the Cares Act, the $2.2 trillion stimulus package passed in March. Major airlines also received an additional $25 billion in federal aid to pay workers by the end of September, to avoid mass layoffs they said would otherwise have been inevitable. Most means of payment consist of grants that do not have to be reimbursed.

Analysts thought interest in the second batch of federal loans would be lower due to conditions — including the transfer of a potential stake in government ownership — and the availability of money from private sources. Major airlines like American, United, Delta and Southwest have raised billions of available cash in the private credit market. Treasury Secretary Steven Mnuchin said his department was still discussing loans with other airlines and hoped to reach agreements as soon as possible. . . .

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