Airlines Close on $13 Billion in CARES Act Loans

The Treasury Department announced this week that seven passenger airlines had closed loans under the authority provided in the March 2020 CARES Act, totaling at least $13 billion out of the $25 billion in allowable loan authority.

Treasury is posting documents on its website for each loan within 72 hours of closing, so at present, we have details on five of the loans: for American, Alaska, Frontier, Hawaiian, and United. Loan details for JetBlue and SkyWest were not yet available as of this writing.

Because two of the four U.S. megacarriers (Delta and Southwest) elected to borrow from the private markets and not take advantage of the CARES program, more of the $25 billion will remain that can be divided amongst other applicants. Treasury says that, if this holds true, the $12.9 billion in loans closed to those five carriers will eventually grow to $18.1 billion.

Only $1.4 billion was drawn (disbursed) this week. Most carriers secured their loans with their frequent flier programs (which makes this AAdvantage member a bit uneasy), but Hawaiian put up some of its aircraft in addition to its loyalty program, and United put up its European and South American routes as well as some aircraft.

Whenever an airline makes a draw on its loan, it has to give Treasury warrants to purchase common stock equal to 10 percent of the loan disbursement.

The CARES Act requires airlines receiving Treasury loans not to fire or furlough employees before September 30, 2020, but since that date has already passed, the loans have no direct bearing on the legal ability of airlines to reduce payroll.

American Alaska Frontier Hawaiian United
Initial Loan $5.477 billion $1.301 billion $574 million $420 million $5.170 billion
Max. Loan $7.5 billion $1.928 billion $574 million $622 million $7.5 billion
Initial Draw $550 million $135 million $150 million $45 million $520 million
Maturity Date June 30, 2025 Sept. 26, 2025 Sept. 26, 2025 June 30, 2024 Sept. 26, 2025
Rate LIBOR + 3.5% LIBOR + 2.5% LIBOR + 2.5% LIBOR + 2.5% LIBOR + 3.0%
Secured by Freq. Flyer Prog. Freq. Flyer Prog. Freq. Flyer Prog. FFP, aircraft Int’l routes, aircraft
Stock Warrants 10% of loan draw 10% of loan draw 10% of loan draw 10% of loan draw 10% of loan draw



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