Delta, United and other airlines strike deal for federal coronavirus loans

Key Points
  • U.S. airlines are striking deals with the Treasury Department for terms of $25 billion in federal coronavirus loans.
  • Delta, United and other airlines part of second group to strike deal for the aid.
  • The sector is reeling from the pandemic as bookings trend far below last year's levels.
A Delta Airlines aircraft flies into San Diego International Airport (SAN) in San Diego, California, April 27, 2020.
Bing Guan | Bloomberg | Getty Images

Five more airlines have reached agreements with the Treasury Department on the terms of billions in federal loans to help the carriers weather the coronavirus pandemic.

Covid-19 has devastated demand for air travel and sent U.S. carriers to their first losses in years.

Delta, United, JetBlue, Southwest and Alaska have signed letters of intent for the terms of the loans, the Treasury Department said Tuesday. Last week, it announced that American, Frontier, Hawaiian, SkyWest and Spirit had also struck agreements for the aid. The CARES Act, a $2.2 trillion coronavirus relief package passed in March, set aside $25 billion in loans for U.S. passenger airlines.

Airlines are grappling with spikes in coronavirus cases around the country and travel restrictions that are threatening demand for flights.

United last week said that demand had started to "flatten out" after a resurgence in previous weeks.

The Chicago-based airline told employees this week that new Covid-19 cases along with quarantine requirements and restrictions like those set by New York, New Jersey and Connecticut are having a negative impact on demand. In United's hub in Newark, New Jersey, its net bookings were down 84% at the start of the month from a year earlier and down 73% elsewhere in the U.S, the airline said.

"The major U.S. airlines play a vital role in our economy and are critical to domestic and international travel and commerce," the Treasury Department said. "These airlines are among the companies most heavily affected by the disruptions to social and economic activity caused by the pandemic." 

The Treasury Department didn't disclose the terms of each potential loan or the amounts and the agreements don't necessarily mean that the carriers will tap them. Delta in April said it is eligible for a $4.6 billion loan while United in May said it could access $4.5 billion.

Airlines also have received portions of $25 billion in federal payroll grants that prohibit them from laying off or cutting the pay rates of their employees through Sept. 30.

But airlines including Delta and United have recently warned employees that they could start receiving as early as this month government-mandated advance notices about potential job cuts.

United Airlines to send 'warn' notices to employees about potential layoffs
United Airlines to send 'warn' notices to employees about potential layoffs