Delta signs letter of intent for CARES Act loan

A masked passenger walks through the check-in area at Hartsfield-Jackson Airport's South Terminal on Tuesday, June 23, 2020. Miguel Martinez for The Atlanta Journal-Constitution
A masked passenger walks through the check-in area at Hartsfield-Jackson Airport's South Terminal on Tuesday, June 23, 2020. Miguel Martinez for The Atlanta Journal-Constitution

Credit: Miguel Martinez for The Atlanta

Credit: Miguel Martinez for The Atlanta

Delta Air Lines and other U.S. carriers have signed letters of intent to take out loans from the federal government under the CARES Act.

U.S. Treasury Secretary Steven Mnuchin issued a statement Tuesday that Delta, Southwest, JetBlue, United and Alaska Airlines have signed letters of intent for the loans. That's in addition to American, Frontier, Hawaiian, SkyWest and Spirit Airlines, which signed letters of intent announced last week.

Atlanta-based Delta earlier this year submitted an application for $4.6 billion in loans for coronavirus relief, and though it has now signed a letter of intent, it still has until September to decide whether to take the loans.

"The major U.S. airlines play a vital role in our economy and are critical to domestic and international travel and commerce. These airlines are among the companies most heavily affected by the disruptions to social and economic activity caused by the pandemic," Mnuchin said in a written statement.

He said the Treasury Department would finalize agreements with the airlines “and provide the airlines the ability to access these loans if they so choose.”

The letters of intent set out the terms for the loans.

Delta already accepted $5.4 billion in federal relief funding, including grants and a $1.6 billion low-interest loan, as part of $25 billion in rescue financing for passenger airlines.

The funding conditions restrict airlines from cutting workers' pay rates or benefits or conducting involuntary furloughs through Sept. 30.

However, Delta has already notified pilots that it may need to furlough thousands of pilots. The airline also cut many employees' hours and total pay. More than 40,000 Delta workers volunteered to take unpaid leaves of absence. And the company is cutting its staff through buyouts and early retirements.

Delta has been raising billions in financing on its own in an effort to sustain its business while travel remains down significantly due to COVID-19.

As a condition of accepting loans from the federal government, airlines must provide the government with warrants, equity or senior debt instruments.

The loans are intended to be available to airlines that do not otherwise have credit reasonably available, according to the CARES Act. They restrict airlines' ability to do stock buybacks and pay dividends and how much they pay executives.

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