U.S. regional carriers ask govt to prioritize them when awarding payroll grants By Reuters

© Reuters.

By David Shepardson and Tracy Rucinski

WASHINGTON/CHICAGO (Reuters) – U.S. regional carriers asked the U.S. Treasury Department on Monday to prioritize assistance for them when awarding $25 billion in cash grants to help the struggling industry stay afloat, according to a letter seen by Reuters.

The letter was sent by the Regional Airline Association, which represents around 20 firms that operate short-haul routes for mainline carriers American Airlines Group Inc (O:), Delta Air Lines Inc (N:) and United Airlines Holdings Inc (O:).

Their business has tumbled in line with sharp flight reductions by the large carriers as the coronavirus decimates travel demand. The pandemic spurred Congress to pass a relief package worth roughly $50 billion for the sector last week, half in the form of payroll grants.

The association suggested the Treasury Department could give all carriers at least $250 million and divide the remaining funds among qualifying carriers according to their payroll needs.

“This ensures the smallest carriers, with the most vulnerable employees and which serve the most isolated communities, receive adequate assistance,” the association said in the letter addressed to Treasury Secretary Steven Mnuchin and Transportation Secretary Elaine Chao.

American Airlines, the U.S. carrier with the largest workforce, has said it is eligible for up to $6 billion in grants.

The regional carriers also asked that they not be required to “provide warrants, equity, notes or other financial instruments” as compensation for the cash assistance.

U.S. Treasury Department guidelines issued on Monday say carriers seeking grants must identify financial instruments as possible compensation for the cash grants.

Most regional airlines are not publicly traded and cannot take on debt or access capital markets.

If those conditions were applied, they would could not receive the grants and would have to “immediately furlough tens of thousands” of employees in a move that would risk service to vulnerable small communities, the association’s CEO, Faye Malarkey Black, said in the letter.

U.S. regional airlines directly employ 70,000 people, operate 41% of all U.S. departures and served over 160 million passengers last year.

Of the regional carriers, only SkyWest Inc (O:) and Mesa Air Group (O:) are listed. Two regional carriers, Trans States and Compass, have already said they plan to shut down due to the pandemic.

American, United and Delta have relied on regional carriers, which have a lower cost structure, to fly many of the domestic routes that take passengers into large hubs for international departures. But the three majors are now only flying a fraction of their normal schedules.

American, for example, is ending its regional flying out of Los Angeles starting April 7. On a peak day in August 2019, it had about 70 daily regional flights out of LAX, an official said.

Under the law approved last week, Chao must determine what reasonable air services carriers receiving grants or loans should be required to maintain.

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