The U.S. Treasury Department has agreed to terms for loans to American Airlines Group Inc. and four smaller airlines as part of an aid program to help the industry weather the coronavirus pandemic. The Treasury said that in addition to American, Frontier Airlines, Hawaiian Airlines, SkyWest Airlines and Spirit Airlines Inc. had agreed to loan terms and signed letters of intent.

Air travel fell sharply this spring as government restrictions on travel and fears of infection kept passengers from flying. While air travel has started to rise, demand remains a fraction of what it was a year ago and airline executives have said they expect a full recovery will likely take years.

Other airlines have said they expect to be eligible for billions in federal loans but haven’t yet signed letters of intent, though conversations are ongoing, a Treasury Department spokeswoman said. U.S. passenger airlines, posting their first losses in years because of the virus, were allowed to apply for portions of the $25 billion in federal loans, funding set aside under the CARES Act in March.

The Treasury Department didn’t disclose the amounts and terms of the loans, for which airlines were required to put up equity, warrants, or senior debt to compensate taxpayers. But executives have been previewing the amount they expect to receive.

American Airlines CEO Doug Parker told staff that the airline expects to finalize the $4.75 billion-loan in the third quarter. Last month he told shareholders that the carrier plans to use cash flows from its AAdvantage frequent flyer credit card as collateral. In the spring U.S. airlines started receiving portions of an additional $25 billion in aid that secures sector jobs through Sept. 30, relief that airline labor unions want extended through next March.

Todd Horwitz Chief Strategist
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