David Shepardson
WASHINGTON (Reuters) – The U.S. Treasury said on Friday it plans to hold a series of auctions of warrants to buy shares of U.S. airlines it received after Congress approved $54 billion in airline aid in 2020 and 2021.
Of the $54 billion awarded, airlines were required to pay $14 billion. The Treasury received warrants to purchase shares at the share price at the time the government awards were issued. Airlines accepting government aid were prohibited from furloughing or laying off workers, and faced restrictions on executive compensation and bans on share buybacks and dividends, which expired in September 2022.
American Airlines (NASDAQ:) received $12.6 billion in government aid, followed by Delta Air Lines (NYSE:) with $11.9 billion, United Airlines with $10.9 billion and Southwest Airlines (NYSE:) with $7.2 billion.
Seven other airlines received smaller awards, including $2.2 billion for Alaska Airlines.
The warrants are worth about $478 million based on Friday’s closing stock prices, according to Reuters calculations. Many airline warrants are priced below current trading prices for carrier shares.
The Treasury held a call with airlines to inform them of the plan, airline officials said.
The US government also provided $25 billion in low-cost loans to airlines.
The Treasury said that “proceeds from these sales will provide additional revenue to American taxpayers through the financial assistance and liquidity that the Treasury has provided to these airlines during the pandemic.”
Delta and United declined to comment. Other major airlines did not immediately comment.
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Auctions are expected to begin on June 3, and the warrants will only be available to qualified institutional buyers, the Treasury Department said.
Many other countries’ aviation relief efforts against COVID-19 have required higher refund rates, while other U.S. industries have not received the same level of government financial support.
The COVID crisis led to a historic drop in demand for air travel, as U.S. air passenger traffic fell 60% in 2020 to its lowest level since 1984, down more than 550 million passengers as airlines cut costs and struggled to survive.
Air travel has since returned to pre-COVID-19 levels and could reach a new record this year.