American Airlines Group Inc. announced that the U.S. Department of the Treasury has approved $5.8 billion in financial assistance from the Payroll Support Program (PSP) created through the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
The funds, which are targeted to support team member salaries and benefits, will come in two forms: a direct grant of $4.1 billion, and a low-interest rate loan of $1.7 billion. In addition to the $5.8 billion, American expects to separately apply for a loan from the U.S. Treasury of approximately $4.75 billion.
American Airlines Chairman and CEO Doug Parker commended the support. “The Payroll Support Program recognizes the extraordinary dedication of our entire team, and importantly, sustains the critical air service being provided by our frontline team members,” he said. “Those team members are our heroes, and we are elated that this program will enable us to continue to employ and pay our team while they fly through this period of depressed consumer demand. This program would not have come about without the collaborative, bipartisan approach that was undertaken, and we applaud the administration, Secretary Mnuchin, Secretary Chao and congressional leadership for their efforts and vision. We also are thankful for the extraordinary support of our team and the unions that represent them.
“The support our government has entrusted to us carries immense responsibility and an obligation that American Airlines is privileged to undertake. We recognize the importance of our service as evidenced by the customers who continue to fly today for important reasons, including medical professionals getting to where they are most needed and family members getting to where they feel most safe. It is our privilege to continue flying through the downturn and to be in a ready position as our country and the world return to the skies.”
The PSP protects American’s team members from involuntary furloughs or pay rate reductions through Sept. 30, 2020, at which point demand for air travel will have hopefully recovered. The airline has also agreed to limitations on stock buybacks, dividends and executive compensation.
American Airlines Group will file a Form 8-K with the Securities and Exchange Commission, which will include additional financial terms of the payroll support program, as well as the warrants proposed to be issued in connection with both the payroll support program and the loan program.
