CHICAGO/WASHINGTON, March 18 (Reuters) - Shares in U.S. airlines fell sharply on Wednesday after Washington proposed a rescue package of $50 billion in loans, but no grants as the industry had requested, to help address the financial impact from the deepening coronavirus crisis.
The Trump administration’s lending proposal would require airlines to maintain a certain amount of service and limit increases in executive compensation until the loans are repaid.
The largest U.S. airlines — American Airlines Group Inc , Delta Air Lines Inc and United Airlines Holdings Inc — are drastically reducing flights, parking jets, raising capital and cutting costs including executive pay as part of measures to save cash as air travel demand takes an unprecedented downturn.
But the industry says government assistance is also needed to avoid collapse.
Airlines’ request for aid has faced pushback from some lawmakers demanding that any government package include protections on employees and a ban on share buybacks.
Democratic Senator Chris Murphy said Wednesday that “sentiment is shifting because there is no straight-face justification to give no-strings-attached cash to an industry that had the chance to use massive profits and tax cuts to build a rainy day fund, but instead used the money to pad investor returns and executive pay.”
U.S. Senate Democratic leader Chuck Schumer on Wednesday called billions of dollars of share buybacks that airlines have spent “money they should have been saving for a rainy day for their customers and workers.”
U.S. Senator Elizabeth Warren said on Twitter that “any money should come with serious long-term change to the companies - no more buybacks, a $15 minimum wage, and more.”
In their push for aid, airlines have touted the role their services will play in revamping the global economy.
“When this pandemic passes – and it will – air travel will play a major role in getting life back to normal and supporting economic recovery. We are going to need significant government help to do that,” JetBlue Airways Chief Executive Robin Hayes and President Joanna Geraghty said in a memo on Wednesday.
JetBlue Airways Corp said its customer cancel rate was more than 10 times the norm, forcing it to suspend more flights and review its fleet plans.
Delta on Wednesday said it was parking more than 600 jets and scaling back its flying by more than 70% until demand begins to recover, with revenues seen declining by $2 billion in March.
Delta Chief Executive Ed Bastian, who likened the steps to hitting a “pause button” on operations, said in a memo to employees he was optimistic about industry support from the White House and Congress but would continue taking “all necessary self-help measures.”
Shares in Delta lost 23%, while United stock was down 29% and American 22%.
U.S. airline and flight attendant groups, trying to prevent tens of thousands of job losses, were also supporting companies’ push for aid.
“Our focus is on saving the industry and doing it in a way that is worker focused,” Sara Nelson, president of the Association of Flight Attendants union representing 20 airlines including United, told Reuters.
Jason Goldberg, an American Airlines pilot and spokesman for the Allied Pilots Association, said any rescue package should not be a “no strings attached” deal. (Reporting by Tracy Rucinski in Chicago and David Shepardson in Washington Additional reporting by Heather Timmons in Washington; Editing by Tom Brown)