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Crippled Airline Industry to Get $25 Billion Bailout, Part of It as Loans

WASHINGTON — The Trump administration has reached an agreement in principle with major airlines over the terms of a $25 billion bailout to prop up an industry hobbled by the coronavirus pandemic.

The Treasury Department said that Alaska Airlines, Allegiant Air, American Airlines, Delta Air Lines, Frontier Airlines, Hawaiian Airlines, JetBlue Airways, United Airlines, SkyWest Airlines and Southwest Airlines would participate. The program is supposed to help the companies pay their workers and was created as part of the economic stabilization package that Congress passed last month.

In recent days, the bailout negotiations had became contentious over the Treasury’s insistence that larger airlines repay at least some of the money they received. The two sides ultimately agreed that the government’s support would be structured as part grant and part loan and the Treasury would also receive warrants to buy stock in the companies.

“This agreement will fully support airline industry workers, preserve the vital role airlines play in our economy and protect taxpayers,” President Trump said Tuesday at a White House news conference. “Our airlines now are in good shape and they will get over a very tough period of time that was not caused by them.”

The Treasury secretary, Steven Mnuchin, said in a statement that the agreement would “help preserve the strategic importance of the airline industry while allowing for appropriate compensation to the taxpayers.”

The Treasury had been pushing the airlines to repay 30 percent of the money over five years. Airline executives and labor leaders complained that the Trump administration was turning what Congress intended to be grants into loans.

Airlines for America, an industry lobbying group, said that as of April 9, U.S. airlines had idled 2,200 aircraft and that passenger volume was down 95 percent from a year ago. Global passenger revenues are expected to fall by $314 billion this year, a 55 percent decline from last year, the International Air Transport Association, a global industry group, said on Tuesday.

The stimulus, passed late last month, largely incorporated the assistance that the industry had sought, including the $25 billion in payroll support and another $25 billion in loans for passenger airlines and more than $10 billion in grants and loans for cargo airlines and aviation contractors. But the aid came with some strings attached, including giving Mr. Mnuchin the authority to take an equity stake in airlines that receive the grants.

Treasury officials determined that 70 percent of the grants to airlines would benefit taxpayers through payroll and income tax receipts and by reducing the unemployment insurance payments that the government would have paid to airline workers had they lost their jobs. The remaining 30 percent would not directly benefit taxpayers, and therefore would be repaid as a loan over a period of 10 years, a senior Treasury official said on Tuesday.

The Treasury will also receive stock warrants worth 10 percent of the loan amount that exceeds $100 million.

The official said that the structure of the agreement was a carefully negotiated compromise, as airlines were seeking grants with no repayment and the administration preferred loans. The economic relief legislation also allocated a separate $25 billion specifically for loans to the airlines, but the official said that negotiations with the companies for those funds had not begun. The Treasury is also engaged in negotiations with cargo carriers, which are eligible for $8 billion in grants and loans.

The Treasury Department said last week that it would not require airlines that receive up to $100 million in bailout money to give the government equity stakes or other compensation. The government had received over 200 applications from U.S. airlines seeking payroll support and the Treasury said the majority of those were asking for less than $10 million.

Airlines that accept the payroll support money are prohibited from major staffing or pay cuts through September. The airlines must also refrain from buying back shares or paying dividends through September 2021 and must agree to limits on executive pay until late March 2022.

In a statement, Sara Nelson, the president of the Association of Flight Attendants union, welcomed the payout as “an unprecedented accomplishment,” but criticized Mr. Mnuchin for delaying the aid and for asking that airlines repay a portion of the funds.

“Now we must fight to keep aviation intact to protect our industry and ensure our economy lifts off again when the virus is under control,” Ms. Nelson said. “We have seen what happens when investment bankers like Secretary Mnuchin control the outcomes, and we will not stand by to watch it play out again.”

Separately, Capt. Joe DePete, the president of the Air Line Pilots Association, which represents more than 63,000 pilots at United, Delta and other airlines, accused the department of “undermining the intent” of the law, “which will make it harder to stop layoffs and slow the recovery.”

American Airlines said it would receive $5.8 billion as part of the deal, with more than $4 billion in the form of grants and the remaining $1.7 billion as a low-interest loan. The airline also plans to apply for a nearly $4.8 billion loan from the department under the loan provision of the legislation.

“The Payroll Support Program recognizes the extraordinary dedication of our entire team, and importantly, sustains the critical air service being provided by our front-line team members,” American’s chief executive, Doug Parker, said in a statement.

Delta said it would receive $5.4 billion, including a $1.6 billion loan. The company said it would provide the government with warrants to acquire about 1 percent of its stock at a price of $24.39 a share over a period of five years.

“This is an essential step, but just one of many that will get us through the next several months,” the chief executive, Ed Bastian, said in a note to staff.

Southwest Airlines said it expected to receive $3.2 billion, about $1 billion of which would come in the form of a low-interest loan. That loan is expected to include about 2.6 million warrants that would allow the Treasury to buy stock in the company. JetBlue said it would receive nearly $936 million, with about $251 million in the form of a loan.

United Airlines and Alaska Airlines said they expected to complete their agreements with the Treasury over the next few days.

The pandemic stalled the airline industry in just a matter of weeks. In February, passenger traffic for the top 25 U.S. airlines rose 6.7 percent compared with the same month a year earlier, one of the largest increases in a 29-month streak of gains, according to federal data published on Tuesday.

But in March, air travel nearly came to a standstill. On the first day of the month, the Transportation Security Administration screened nearly 2.3 million passengers, flight crew members and other airport and airline workers at its airport checkpoints. By the last day of the month, that figure had dropped nearly 95 percent to just under 150,000.

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Flight Attendants and Pilots Ask, ‘Is It OK to Keep Working?’

Molly Choma, a flight attendant for Alaska Airlines, had worked nearly every day since mid-March, even as the coronavirus outbreak devastated her industry. But last Sunday, she woke up alone in a room in a nearly empty hotel and wondered if it was time to stop.

As she prepared for Flight 1002, which would bring her home to the San Francisco Bay Area from Washington, Ms. Choma, 33, turned on the news and texted her colleagues. Were they planning to keep flying? Should she?

“I’m thinking about my family, thinking about my friends, thinking about what that would mean for the rest of the month,” she said. “I don’t know how this thing is going to shape my life or the world or aviation or the history of pretty much everything.”

Airlines have canceled a staggering number of flights, but thousands still take off every day, leaving many of the people needed to keep them running to reckon with whether to continue working and how to stay safe if they do.

For Ms. Choma, those remaining flights provided a financial cushion. After the pandemic halted the photography business she has nurtured on the side, she took on flights from colleagues who couldn’t, or wouldn’t, staff them.

Some airline employees have continued to show up reluctantly, either because they need the money or fear losing their jobs once the crisis has ebbed. Others who had once relied on extra income from loaded-up schedules now have to make do with what few flights are available. Tens of thousands more have taken unpaid leave, staying home out of necessity or concern or to free up slots for colleagues who may need the income more.

Already, hundreds of flight attendants and pilots have fallen ill and at least five have died from the coronavirus, according to the labor unions that represent them. And even though the industry secured $25 billion from the federal government to pay employees through September, the future remains bleak.

Many airlines are likely to emerge from the crisis with fewer employees, and a full recovery isn’t expected any time soon. It took several years for passenger volume to rebound after the terrorist attacks in 2001, a shock less severe than the current crisis, which is seen by many as the worst in the history of aviation.

The devastation arrived abruptly in late February as new bookings started to plummet and cancellations began to surge. Less than two months later, air travel has fallen to new lows. On Tuesday, for the first time since the Transportation Security Administration was formed after the Sept. 11 attacks, the agency screened fewer than 100,000 travelers, pilots, flight attendants and airport and airline workers at its checkpoints. On the same day last year, it screened more than two million people.

Airlines have slashed service dramatically, but they still run thousands of daily flights. On Tuesday, for example, there were nearly 8,000 flights in the United States, compared with nearly 35,000 a year ago, according to the aviation data provider OAG. The industry is cutting more, but must maintain minimum service to many destinations under the conditions Congress imposed on the grants earmarked for airline employees.

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Credit…Anastasiia Sapon for The New York Times
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Credit…Anastasiia Sapon for The New York Times

The uncertain future of the industry factored into Ms. Choma’s thinking last Sunday. By the time she walked through her desolate hotel lobby that afternoon she had regained her resolve. She would continue to do what she’s done since she became a flight attendant right out of college 11 years ago.

“I don’t know if it’s stupid or crazy but I just feel like I’m supposed to be here doing this work, taking these five or 10 people where they need to go,” she said. “It’s like a guttural, instinctive reaction that this is what I’m supposed to be doing right now.”

Flight attendants at major airlines are typically guaranteed a minimum amount of work, which they can then trade among themselves to make more money or to take more time off. Some routinely put in extra hours, though that option has largely disappeared. In 2018, more than 119,000 flight attendants were working in the United States, earning a median annual salary of $56,000, according to the Bureau of Labor Statistics. That same year, there were more than 124,000 pilots, with a median salary of more than $115,000.

Ms. Choma, whose event and portrait photography business has suffered from cancellations, said flying gives her a sense of purpose during this unsettling time and allows her to maintain a steady income while providing relief to those who can’t or don’t want to work.

It’s not that she doesn’t worry about getting sick, but she’s young, healthy and has no children. Having grown up with a mother who was a flight attendant for nearly two decades, Ms. Choma also long ago came to terms with the risks of the job.

“That sounds really dark, but having that worry that something bad might happen at work has always been somewhere in my head,” she said. “It’s just amplified right now, but I think consoling myself through those fears is a skill set I’ve already developed.”

While Ms. Choma said her employer had generally been good about providing crew members with gloves and masks, flight attendants and pilots at several major airlines, many of whom requested anonymity for fear of losing their jobs, said they have had to take their own supplies to work. Even when airlines have committed to providing protective equipment, many have run into the same supply problems that have plagued hospitals across the country.

“There is this real sort of conflict among our ranks of wanting to do the job, wanting to do what’s necessary for our nation, and yet saying, ‘What are you doing to make sure that we’re actually safe on the job and that the risk of exposure is minimized?’” said Sara Nelson, president of the Association of Flight Attendants union.

The union, which represents workers at Alaska Airlines, United Airlines and more than a dozen other companies, has called on the administration and airlines to prohibit all leisure travel. The Air Line Pilots Association, which represents more than 63,000 pilots at Delta Air Lines, United and other carriers, has asked the Federal Aviation Administration to mandate routine cockpit cleaning and require airlines to quickly inform employees who have come into contact with individuals who are or may be infected.

“Those crew members need to know that they’ve been exposed so that they can protect their own health, their family’s health and that they don’t spread the illness to customers or other crew members or employees,” said Lauren Metz, a pilot for Delta and a spokeswoman for the Delta Master Executive Council, a unit of the pilots association.

It was harder to stay safe early in the crisis, when planes were often relatively full and tensions ran high. But the few people still traveling are wary of interacting with others.

Many of those who continue to fly do so out of necessity, Ms. Metz and Ms. Choma said. One man on a flight with Ms. Choma was traveling home to San Francisco from a visit in Chicago with his father, who was dying of cancer, she said. On another flight, a woman was leaving an abusive husband. Ms. Metz recently transported nearly 75 passengers, many of whom had been stuck on a quarantined cruise ship.

For flight crews, the pandemic has altered life in other ways. With airports and their destinations often virtually shut down, planning trips is more difficult.

One recent Thursday morning, Ms. Choma spent 45 minutes in bed researching the weather and news at her destination, knowing she probably would have a long walk to find dinner. The bag that she normally packs with fresh food and snacks now holds longer-lasting items like Campbell’s Chunky Classic Chicken Noodle Soup, packets of tuna, and blueberry and chocolate coconut Rxbars.

“It’s stuff that if I got stuck somewhere, if something really went bad and they shut down everything, that I’d be OK,” she said.

There are some small comforts in this new reality. On a recent trip to Southern California, Ms. Metz checked into a hotel she often stays at and was assigned a prized room with a view of the San Diego Bay. For Ms. Choma, an hourlong commute now takes 15 minutes, in part because she’s allowed to park closer to the airport instead of in a lot that’s a shuttle ride away.

On that recent Thursday, Ms. Choma left the house that she shares with roommates, got in her car and pulled into a spot near Terminal 2 at San Francisco International Airport. There, she put on her lipstick and breezed past the security checkpoint. The quiet of the airport amplified the click of her heels and the squeak of the wheels on her bag, sounds that would normally be drowned out by the crowds.

“It’s like you’re just waiting for the hammer to drop or waiting for the rug to get pulled from under you,” she said. “How far is this going to go? Where is this going to go? What are the airlines going to look like after this?”

At the terminal, Ms. Choma grabbed a cup of coffee from the Napa Farms Market, which is usually so busy that she doesn’t have time to stop. She boarded Flight 1080, bound for Washington. Typically, the plane can seat over 150 passengers, but there were just 12 along with six crew members, she said.

The passengers kept to themselves, so Ms. Choma caught up with her colleagues and then took in the scene.

“It’s just really still in the air,” she said. “And you look down on the ground and everything is clearer than you’ve ever seen it. The oceans are bluer, the lakes are bluer, the grass is greener. That might just be a spring thing, but I swear the air is clearer than it’s ever been before. Or maybe it’s just because I’m able to look out a window.”