U.S. Senate bill grants aviation sector big bailout - Republican senator

 U.S. Senate bill grants aviation sector big bailout - Republican senator

By David Shepardson and Tracy Rucinski

WASHINGTON/CHICAGO (Reuters) - A compromise $2 trillion economic rescue package set to be voted on by the U.S. Senate on Wednesday will include $25 billion for airlines in cash grants, a badly needed lifeline for an industry facing the worst travel downturn in history.

Republican Senator Pat Toomey said passenger airlines will be eligible for $25 billion in grants and $25 billion in loans. Cargo carriers will be eligible for another $8 billion in loans and grants, while airline contractors like caterers will be eligible for up to $3 billion in grants, according to a draft text of the final bill seen by Reuters.

The grants are to be used for payroll costs for airlines and contractors.

Reuters reported Chao worked the phones late into the night talking to air carriers about what they needed to ensure they could maintain payrolls, a person briefed on call on Tuesday that lawmakers were nearing agreement on a deal for cash grants for payroll and other airline employee costs, after airlines made a last-minute effort to convince lawmakers they needed the cash to prevent the layoff of tens of thousands of workers.

The government could receive equity, warrants or other compensation as part of the rescue package, Toomey said.

U.S. airports are set to receive $10 billion in grants under the agreement, the draft text says.

The bill also has restrictions on stock buybacks, dividends and executive compensation. Airlines that accept assistance will not be able to cut pay or lay off workers through Sept. 30, according to the draft bill.

Senate Republicans on Sunday rejected any grants for airlines and instead proposed $58 billion in loans for airlines. Major airlines sounded the alarm and emphasized in recent days that without grants, they had short-term plans to quickly furlough tens of thousands of workers as travel demand collapses amid the coronavirus pandemic.

Sara Nelson, president of the Association of Flight Attendants said on Twitter it was a "HUGE fight but we WON on this - We got the deal structured around maintaining payroll, no (involuntary) furloughs."

Airlines and airline unions won crucial support from U.S. Transportation Secretary Elaine Chao, who spoke to lawmakers and others in the administration about the crisis.

In a memo Chao had drafted that was seen by Reuters, she noted that airlines employ 750,000 U.S. workers. She was worried about a dramatic decline in the U.S. aviation sector that could reduce competition, and the potential loss of hundreds of thousands of jobs, people briefed on the matter said.

"Without grant assistance, U.S. airlines have warned that they may be forced to furlough employees or declare bankruptcy," Chao's memo warned. "Without grants, airlines may be forced to choose bankruptcy over federal loans, if loan conditions are too inflexible."

Chao worked the phones late into the night talking to air carriers about what they needed to ensure they could maintain payrolls, said a person briefed on call.

The government will provide $25 billion in grants for U.S. transit systems and $1 billion for U.S. passenger railroad Amtrak, that have seen ridership fall dramatically as states ordered tens of millions of Americans to stay home and avoid non-essential travel.

Boeing Co could also receive government loans under a $17 billion fund set aside for direct national security-related loans, Toomey said, adding that many companies could qualify.

"It is not meant to be exclusively for Boeing... You should not think of it as a Boeing allocation," Toomey said.

Boeing had sought at least $60 billion in government loan guarantees for itself and the entire aerospace manufacturing sector. Boeing did not immediately comment on Wednesday.

(Reporting by David Shepardson, Tracy Rucinski and Doina Chiacu; Editing by Bernadette Baum)

This story has not been edited by Firstpost staff and is generated by auto-feed.

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Updated Date: Mar 26, 2020 00:06:22 IST