Sep 25, 2020 - Economy & Business

American Airlines taps $5.5 billion Treasury loan

An American Airlines plane.

Photo: Deccio Serrano/NurPhoto

American Airlines on Friday said it accepted a $5.5 billion loan through the Treasury Department, and may be allowed to tap billions more in October, per Reuters.

The state of play: The company was initially allotted $4.75 billion, but after other carriers, including Delta Air Lines and Southwest Airlines, said they don't plan to take their portion of the $25 billion package earmarked in the CARES Act, more funds were available for other airlines.

  • Air carriers have until Sept. 30 to decide whether to take the loans.
  • United Airlines said earlier this week it also intends to take the Treasury loan. The company did not elaborate on whether it will take the $4.5 billion it was allocated or try to get more, per Reuters.

Details: American Airlines has already drawn down $550 million of the Treasury loan, according to Reuters.

  • The loan carries restrictions on share buy-backs and executive compensation.
  • American Airlines "could tap up to $2 billion more in October depending on how the U.S. Treasury allocates extra funds," Reuters wrote.

Worth noting: U.S. airlines received a separate $25 billion in payroll assistance for passenger airlines under the CARES Act, which was passed in March.

  • Earlier this week, CEOs urged leaders in Washington to support another $25 billion bailout to avoid tens of thousands of furloughs and layoffs.
  • White House chief of Staff Mark Meadows said President Trump would support an additional $25 billion from Congress to extend the current aid package through next March. But lawmakers remain divided over a broader economic relief package, and it's unclear they'll act on any stimulus deal before the November election.

The big picture: U.S. airlines were on their way to another strong year before the pandemic hit, halting most air traffic and causing revenue to evaporate overnight.

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