U.S. airlines reach agreement in principle on billions in government coronavirus aid

U.S. airlines and the Treasury Department have reached an agreement in principle on billions in government aid aimed at easing the impact from the coronavirus pandemic, sources told CNBC on Tuesday.

The agreement comes as the strict measures to control the spread of the virus, such as stay-at-home orders, have led air travel demand to its lowest in decades. Carriers have rushed to lower costs by grounding hundreds of jetliners and making thousands of employees take voluntary unpaid leave.

U.S. airlines including American, Delta, United, Southwest and others have applied for portions of $25 billion in payroll grants that require airlines not to furlough or cut the pay rates of any employees through September 30, CNBC reported.

The grants are part of the more than $2 trillion coronavirus rescue package passed by the Congress last month.

“We welcome the news that a number of major airlines intend to participate in the Payroll Support Programme,” the U.S. Treasury Department statement read.

“This is an important CARES Act programme that will support American workers and help preserve the strategic importance of the airline industry while allowing for appropriate compensation to the taxpayers.”

The airlines are expected to provide detail on the aid as early as Tuesday, two of the people familiar with the discussions further told CNBC.

The aid will likely come with additional conditions as the Treasury Department has asked airlines to pay back 30 percent of the grants, essentially turning a portion of them into low-interest loans, according to people familiar with the discussions.

Lawmakers and labour unions objected to those terms, saying the rescue package Congress passed last month intended that the funds would not be structured as loans.