Airlines, contractors may get $40 billion cash grants from House of Democrats amid COVID-19 crisis

The coronavirus outbreak has claimed the lives of more than 14,000 people around the world and infected over 150 countries

The Democratic lawmakers of the US on Monday proposed that they will give the struggling airlines and contractors of the US $40 billion in cash grants and that would not have to be repaid but require significant new environmental, labour and few other conditions.

The US House of Representatives bill, that gives $2.5 trillion in the stimulus and also assistance to the economy of the country amid the coronavirus or COVID-19 outbreak, will award $37 billion as grants to the airlines and $3 billion in grants for the employees of the ground-support and also the catering contractors.

Airlines may receive $21 billion in loans

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An aeroplane flies past the London Eye wheel, and moon, a day before the "supermoon" spectacle in London, Britain Reuters

Airlines could also receive $21 billion in loans that would be at zero percent financing for the first year. Airlines for America, a trade group representing major airlines, told Congress in a term sheet Monday seen by Reuters that if passenger and cargo carriers got $29 billion in grants it would "permit us to save hundreds of thousands of jobs and preserve service to every community currently served in the United States for a period of time." The term sheet said that if Congress added conditions to government loans it could "render the loans unusable because the process provided to businesses via US bankruptcy law is more attractive."

Republicans and Democrats were still struggling on Monday to reach agreement on a far-reaching coronavirus stimulus package, including the airline aid, after failing to reach a deal over the weekend. Republicans have opposed providing bailouts to the passenger and cargo carriers, proposing help in the form of $58 billion in loans and saying the government could demand stock, options or other equity as part of those loans.

The House bill would also set aside $1 billion to eliminate high-polluting airplanes. It would cap chief executive pay at no more than 50 times the median pay of employees and bar stock buybacks. It would also require that "no additional aircraft heavy maintenance work is outsourced to repair stations abroad" and require airlines to have a labor union-designated director.

Airlines made a plea for assistance in the form of cash grants

Airlines would have to maintain "at least $15 minimum wage for all employees or contracted workers." Airlines receiving assistance would need to fully offset their carbon emissions starting in 2025 and reduce carbon emissions 25 percent by 2035 and by 50 percent by 2050. They would also be required to tell customers the amount of carbon emissions attributed to their flights.

Airlines made a plea over the weekend that $29 billion of $58 billion sought in assistance be in the form of cash grants. In return, they offered to make no job cuts through August 31 and to accept curbs on executive pay and forgo paying dividends or stock buybacks. Airlines including United Airlines Holdings Inc have also said they are encouraging employees to apply for voluntary unpaid leaves of absence among other measures aimed at saving costs.

Globally, the number of scheduled flights last week was down more than 12 percent from a year ago, flight data provider OAG said, and many airlines have announced further cuts to come as demand continues to drop. Southwest Airlines Co became the latest US airline to slash its capacity by about 25 percent on Sunday, bringing forward and increasing cancellations that were initially due to run between April 14 and June 5. The cancellations include the suspension of all international flying until May 4, it said.

(With agency inputs)

Related topics : Coronavirus