MtnPeakCruiser

It appears that the funds available to airlines are half and half, zero interest loans and grants for worker payroll. The catch appears to be that the Secretary of Treasury, Steve Mnuchin, would be “empowered” to require equity from any airline receiving grants, if he chooses.

Who knows how this shakes out, but I would see Indigo opting for the loans before giving up any equity for grant money.

Yahoo Finance: U.S. Airline Bailout to Give Loans and Cash-for-Equity Aid

fcoolaiddrinker

I don’t see any carrier giving up equity for grants. That’s a guess based on last time. He just made that statement to keep any potential senators that had concerns about their constituents happy. IMO. The feds are already on the hook for sick and potentially 2 weeks pay. I know that from the structure of how f9 is dealing with corona sick pay. Their expecting reimbursement.

fcoolaiddrinker

Looks like the equity is tied to loans and goes away after the loan is repaid. The grant portion seems to be strictly for payroll. Both have stock buyback and executive compensation limits based on 2019. That’s how I understood it anyhow. Pretty much structured as I was anticipating.

Wheelswatch

So given what you just outlined, and the fact that BB asked us to write our congressmen, is it safe to say Frontier will avail themselves fully? And does this mean they will not furlough? And if they don't furlough, but fly very little, how does scheduling work? Tons of RSV that goes senior?

Aero1900

Good question. Assuming that our assumption of how the grant portion of this bailout will work is correct, Frontier should receive money to cover payroll costs thru Sept.

They could then reduce flying, saving money on fuel and mtx, while not bleeding out payroll costs. From what I gather from reading about the bill, the grants for payroll do require them to not furlough until Sept. Hopefully demand is back by then. The other side of the bailout is loans which not only need to be paid back, but allow the govt to share in the profits. I don't think Indigo likes to share their profits. I bet Frontier continues to offer an unlimited number of COLAs throughout this process. How exactly they will deal with dividing up the reduced amount of flying is going to be up for negotiations. If the Gov't is going to bankroll our payroll costs, taking a leave of absence doesn't really help the company does it?

fcoolaiddrinker

Without actually reading the bill a lot of that would be speculation plus it still needs to pass the house which I expect to happen tomorrow. That outline is based on the Alpa daily summary from today. As far as what f9 does it seems that they have been waiting to make staffing decisions based on the bill. As for scheduling and credit limits that’s for the union to hammer out. As of yesterday the company has not approached ALPA to begin discussions. I would expect that to happen once the details of the bill are clear.

Wheelswatch

Check. Thank you.

fcoolaiddrinker

A couple of things about loans. I wouldn’t rule out f9 taking one. Unknown if the feds get equity in exchange at this point? Even if they do once the loan is repaid the equity disappears. If your not making money while you have a loan balance your not paying dividends. Second a 0% loan is free money. That’s a % that’s being thrown around. Right now money market is still over 1% so free 1%. That’s significant when it’s millions. We’ll know soon enough.

Aero1900

Yeah maybe. But I don't know if the loans are at 0% interest? If so, yeah they would probably take it, but I don't know if 0% is the deal or not

DrJekyll MrHyde

Some light reading for you guys.

SEC. 4112. PANDEMIC RELIEF FOR AVIATION WORKERS.

(a) FINANCIAL ASSISTANCE FOR EMPLOYEE WAGES, SALARIES, AND BENEFITS.—Notwithstanding any other provision of law, to preserve aviation jobs and compensate air carrier industry workers, the Secretary shall provide financial assistance that shall exclusively be used for the continuation of payment of employee wages, salaries, and benefits to—
(1) passenger air carriers, in an aggregate
amount up to $25,000,000,000;
(2) cargo air carriers, in the aggregate amount
up to $4,000,000,000; and
(3) contractors, in an aggregate amount up to
$3,000,000,000.

(b) ADMINISTRATIVE EXPENSES.—Notwithstanding any other provision of law, the Secretary, may use $100,000,000 of the funds made available under section 4120(a) for costs and administrative expenses associated with providing financial assistance under this subtitle.

SEC. 4113. PROCEDURES FOR PROVIDING PAYROLL SUP-
PORT.

(a) AWARDABLE AMOUNTS.—The Secretary shall provide financial assistance under this subtitle—
(1) to an air carrier in an amount equal to the salaries and benefits reported by the air carrier to the Department of Transportation pursuant to part 241 of title 14, Code of Federal Regulations, for the period from April 1, 2019, through September 30, 2019; and
(2) to an air carrier that does not transmit re- ports under such part 241, in an amount that such air carrier certifies, using sworn financial statements or other appropriate data, as the amount of wages,salaries, benefits, and other compensation that such air carrier paid the employees of such air carrier during the period from April 1, 2019, through September 30, 2019; and
(3) to a contractor, in an amount that the contractor certifies, using sworn financial statements or other appropriate data, as the amount of wages, salaries, benefits, and other compensation that such contractor paid the employees of such contractor during the period from April 1, 2019, through September 30, 2019.

[Skipping Forward]

SEC. 4114. REQUIRED ASSURANCES.
5 (a) IN GENERAL.—To be eligible for financial assistance under this subtitle, an air carrier or contractor shall enter into an agreement with the Secretary, or otherwise certify in such form and manner as the Secretary shall prescribe, that the air carrier or contractor shall—
(1) refrain from conducting involuntary furloughs or reducing pay rates and benefits until September 30, 2020;
(2) through September 30, 2021, ensure that neither the air carrier or contractor nor any affiliate of the air carrier or contractor may, in any transaction, purchase an equity security of the air carrier or contractor or the parent company of the air carrier or contractor that is listed on a national securities exchange;
(3) through September 30, 2021, ensure that
the air carrier or contractor shall not pay dividends, or make other capital distributions, with respect to the common stock (or equivalent interest) of the air carrier or contractor; and (4) meet the requirements of sections 4115 and 4116.

{To Be Continued}