House Democrats would give airlines, contractors $40 billion bailout

CHICAGO/WASHINGTON (Reuters) - Democratic U.S. lawmakers on Monday proposed giving struggling U.S. airlines and contractors $40 billion in cash grants that would not have to be paid back but require significant new environmental, labor and other conditions.

American Airlines passenger planes crowd a runway where they are parked due to flight reductions made to slow the spread of coronavirus disease (COVID-19), at Tulsa International Airport in Tulsa, Oklahoma, U.S. March 23, 2020. REUTERS/Nick Oxford

The U.S. House of Representatives bill, which provides $2.5 trillion in stimulus and assistance to the U.S. economy in the face of the coronavirus outbreak, would award $37 billion in grants to airlines and $3 billion in grants to employees of ground-support and catering contractors.

Airlines could also receive $21 billion in loans that would be at zero percent financing for the first year.

Airlines for America, a trade group representing major airlines, told Congress in a term sheet Monday seen by Reuters that if passenger and cargo carriers got $29 billion in grants it would “permit us to save hundreds of thousands of jobs and preserve service to every community currently served in the United States for a period of time.”

The term sheet said that if Congress added conditions to government loans it could “render the loans unusable, because the process provided to businesses via U.S. bankruptcy law is more attractive.”

Republicans and Democrats were still struggling on Monday to reach agreement on a far-reaching coronavirus stimulus package, including the airline aid, after failing to reach a deal over the weekend.

Republicans have opposed providing bailouts to the passenger and cargo carriers, proposing help in the form of $58 billion in loans and saying the government could demand stock, options or other equity as part of those loans.

The House bill would also set aside $1 billion to eliminate high-polluting airplanes. It would cap chief executive pay at no more than 50 times the median pay of employees and bar stock buybacks.

It would also require that “no additional aircraft heavy maintenance work is outsourced to repair stations abroad” and require airlines to have a labor union-designated director.

Airlines would have to maintain “at least $15 minimum wage for all employees or contracted workers.”

Airlines receiving assistance would need to fully offset their carbon emissions starting in 2025 and reduce carbon emissions 25% by 2035 and by 50% by 2050. They would also be required to tell customers the amount of carbon emissions attributed to their flights.

Airlines made a plea over the weekend that $29 billion of $58 billion sought in assistance be in the form of cash grants. In return, they offered to make no job cuts through Aug. 31 and to accept curbs on executive pay and forgo paying dividends or stock buybacks.

Airlines including United Airlines Holdings Inc UAL.N have also said they are encouraging employees to apply for voluntary unpaid leaves of absence among other measures aimed at saving costs.

Globally, the number of scheduled flights last week was down more than 12% from a year ago, flight data provider OAG said, and many airlines have announced further cuts to come as demand continues to drop.

Southwest Airlines Co LUV.N became the latest U.S. airline to slash its capacity by about 25% on Sunday, bringing forward and increasing cancellations that were initially due to run between April 14 and June 5. The cancellations include the suspension of all international flying until May 4, it said.

Reporting by Tracy Rucinski in Chicago and David Shepardson in Washington; Editing by David Gregorio, Peter Cooney and Stephen Coates