Treasury Department could upsize airline loans as Delta, Southwest opt out, freeing up funds

Key Points
  • The Treasury Department said it has closed loans with seven U.S. airlines.
  • Because Delta and Southwest opted to stick with private markets, Treasury will make larger loans than expected to some carriers.
  • American Airlines last week said it expects $7.5 billion will ultimately be available to it under the program, after it secured $5.5 billion.
American Airlines planes are parked at the gate.
Joshua Roberts | Reuters

The Treasury Department on Tuesday said airlines could receive larger federal loans than previously expected after some carriers opted out, freeing up more funds in the program.

Congress in March approved $25 billion in federal loans for U.S. passenger airlines to help them weather the coronavirus pandemic, which has kept air travel demand at roughly 30% of last year's levels.

Despite preliminary agreements, Southwest Airlines and Delta Air Lines have said they ultimately don't plan to pursue the loans, thanks to other sources of financing. Delta, for example, earlier this month said it was able to upsize a debt sale backed by its SkyMiles frequent flyer program to $9 billion from the $6.5 billion it planned.

Airlines have until Wednesday to decide whether to take the federal loans.

Seven airlines —  Alaska, American, Frontier, JetBlue, Hawaiian, SkyWest and United are planning to take the loans, the Treasury Department said.

American last week said it secured $5.5 billion from the program, more than the $4.75 billion it had expected to receive. The Fort Worth-based carrier said it expects it will have up to $7.5 billion available, the maximum amount for a single carrier.

U.S. passenger airlines also received portions of $25 billion in payroll support, mostly grants, from the government. Those funds prohibit carriers from cutting jobs until Oct. 1, but in just hours, the airlines, mostly American and United, plan to cut more than 30,000 jobs.

Airlines and their labor unions are urging Congress for an additional $25 billion that would preserve sector jobs through March 31. That proposal has won support from a bipartisan group of lawmakers as well as from the Trump administration and was included in a new $2.2 trillion national coronavirus relief package House Democrats unveiled on Monday.

"We call on Congress to extend the Payroll Support Program so we can continue to support aviation industry workers as our economy reopens and we continue on the path to recovery," Treasury Secretary Steven Mnuchin said in the statement.

Airline layoffs expected Oct. 1 without additional government aid
Airline layoffs expected Oct. 1 without additional government aid