U.S. airlines face deadline to apply for federal payroll grants

CHICAGO/WASHINGTON (Reuters) – U.S. airlines and airport contractors faced a deadline of 5 p.m. EDT (2100 GMT) on Friday to tap the federal government for up to $32 billion in payroll grants to keep workers employed while they ride out the economic toll of the coronavirus on their business.

The funds are part of a $2.3 trillion coronavirus relief package approved last week which included a special carve-out for the badly bruised air industry.

Passenger airlines are weathering a dramatic drop in travel demand, while cargo carriers are suffering from disruption to global supply chains and high-margin business-to-business demand, even as ground-package delivery services increase.

The U.S. Treasury set the Friday deadline for the airline sector to receive funds as soon as possible. In their applications the airlines must propose financial instruments such as warrants or equity options to compensate taxpayers for the money.

Many Democrats and airline labor unions have pushed back on Treasury’s demand for equity or warrants in return for the grants, arguing that the condition could dissuade airlines from taking money that is meant to protect workers.

Companies can request the amount they paid in salaries and benefits in the second and third quarters of 2019.

American Airlines Group Inc (AAL.O), with the largest number of full-time employees among U.S. airlines at 133,700 in 2019, has said it will be seeking up to $6 billion in grants.

United Airlines Holdings Inc (UAL.O), Delta Air Lines (DAL.N) and Southwest Airlines Co (LUV.N) have also signaled they would apply.

Among cargo carriers, FedEx Corp (FDX.N) said it was eligible for the government money after outlining steps it is taking to save cash and boost liquidity, including slashing its chief executive officer’s pay and drawing down $1.5 billion from a credit facility.

Passenger airlines are eligible for $25 billion in cash grants, cargo carriers $4 billion and airport contractors like caterers and airplane cleaners $3 billion.

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They can also apply for up to $32 billion in federal loans, if they do not have alternative sources of funding. U.S. carriers have raised billions of dollars in new loans in recent weeks.

Bracing for a prolonged downturn in demand, airlines across the world are seeking government aid, with Air France-KLM (AIRF.PA) in talks with banks to receive up to 6 billion euros ($6.5 billion) in loans guaranteed by the French and Dutch governments, sources told Reuters.

Planemakers are also preparing for a slump in demand, with Reuters reporting on Friday that Airbus SE (AIR.PA) is studying a sharp cut in output of its top-selling A320 jet series.

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