Five U.S. airlines reach deals with Treasury Department for billions in coronavirus loans

Key Points
  • The agreements are for portions of $25 billion in federal loans set aside for passenger carriers.
  • Airlines also received portions of an additional $25 billion, in a mix of grants and loans, that protects sector jobs through Sept. 30.
  • The airline sector is under extreme stress because of the coronavirus pandemic that has devastated travel demand.
American Airlines Boeing 787-8 Dreamliner aircraft.
Nicolas Economou | NurPhoto | Getty Images

Five airlines have struck agreements with the Treasury Department for portions of $25 billion in federal loans aimed at softening the blow of the coronavirus pandemic on their businesses.

American Airlines, Hawaiian Airlines, Sky West Airlines, Spirit Airlines and privately-held Frontier Airlines have signed letters of intent for the loan terms, the Treasury Department said Thursday.

Other airlines have said they expect to be eligible for billions in federal loans but haven't yet signed letters of intent, though conversations are ongoing, a Treasury Department spokeswoman said. 

U.S. passenger airlines, posting their first losses in years because of the virus, were allowed to apply for portions of the $25 billion in federal loans, funding set aside under the CARES Act in March.

The Treasury Department didn't disclose the amounts and terms of the loans, for which airlines were required to put up equity, warrants, or senior debt to compensate taxpayers. But executives have been previewing the amount they expect to receive.

American Airlines CEO Doug Parker told staff that the airline expects to finalize the $4.75 billion-loan in the third quarter. Last month he told shareholders that the carrier plans to use cash flows from its AAdvantage frequent flyer credit card as collateral.

In the spring U.S. airlines started receiving portions of an additional $25 billion in aid that secures sector jobs through Sept. 30, relief that airline labor unions want extended through next March.

What this airline analyst learned about travel demand from flying to Mexico
What this airline analyst learned about travel demand from flying to Mexico