US airlines received a bit of lift under their wings

US airlines received a bit of lift under their wings

The US Treasury Department approved a rescue package meant for some of the biggest airlines in the country, as the pandemic made traveling impossible. It comes with strings attached.

Since mid-March, the number of travelers dropped by 95%, which drove many airlines close to bankruptcy. Time.com doesn't paint a happy picture as it expects worldwide airlines to collapse by the end of May if governments don't take measures. One month later, the US government is helping its airlines.

A package worth $25 billion is at the disposal of the companies. Since yesterday, six airlines took advantage of it: American Airlines, United, Delta, Southwest, JetBlue, and Alaska Airlines. American Airlines alone expects $5.8 billion from the fund, which will consist of: $1.7 billion as a loan, and $4.1 billion as a grant. Another credit worth $4.75 billion is in sight.

Delta will get $5.4 billion, from which $1.6 billion is a 10-year loan. Also, the government can buy in over five years' shares at $24.39. 1% of Delta shares can be purchased by it.

Southwest Airlines expects $3.2 billion, from which $1 billion as a loan. Payback is due in 10 years.

In exchange for the funds, the airlines agreed to prohibitions on layoffs and buybacks and providing one flight/week as the minimum level of service. Also, the companies cannot lay off employees until the beginning of October. Moreover, restrictions on returning money to shareholders and executive pay will be in force.

If a company receives help in the range of $100 million or less, it doesn’t need to pay it back.

But those are not the only companies looking for help. Monday, Boeing looked for financial assistance. The experts say that Boeing alone will need $20 billion to cover this year’s debt.

Europe was one step ahead, and since the beginning of the month, Lufthansa expects to receive an emergency fund with a state guarantee of 80%. Air France-KLM was in talks with the French and Dutch governments to secure a loan of 6 billion Euros.

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Sources: bbc.com, cnn.com, news.sky.com, time.com

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The information presented herein is prepared by CAPEX.com and does not intend to constitute Investment Advice. The information herein is provided as a general marketing communication for information purposes only and as such it has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Users/readers should not rely solely on the information presented herewith and should do their own research/analysis by also reading the actual underlying research. The content herewith is generic and does not take into consideration individual personal circumstances, investment experience or current financial situation.

Therefore, Key Way Investments Ltd shall not accept any responsibility for any losses of traders due to the use and the content of the information presented herein. Past performance is not a reliable indicator of future results.