US to hold auctions to sell airline warrants received during COVID bailouts By Reuters

Written by David Shepardson

WASHINGTON (Reuters) – The U.S. Treasury Department said on Friday it plans to hold a series of auctions to sell stock warrants in U.S. airlines it received after Congress approved $54 billion in aid for air carriers in 2020 and 2021 due to the coronavirus.

Of the $54 billion awarded, airlines were required to repay $14 billion. The Treasury Department received orders to purchase shares at the share price at the time of the government grant. Airlines accepting government aid were prohibited from furloughing or firing workers and faced limits on executive compensation and a ban on stock buybacks and dividends that 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 (NYSE:) 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.

According to Reuters calculations, the value of the arrest warrants is about $478 million at stock closing prices on Friday. Many airline warrants are priced below current trading prices of carrier stocks.

Airlines officials said that the Treasury Department made a phone call to the airlines to inform them of the plan.

The US government also provided $25 billion in low-cost loans to airlines.

“The proceeds from these sales will provide additional revenue to American taxpayers from the financial assistance and liquidity that the Treasury has provided to these airlines during the pandemic,” the Treasury Department said.

Delta and United declined to comment. Other major airlines did not immediately comment.

The Treasury said the auctions are expected to begin the week of June 3, and the collateral can only be purchased by qualified institutional buyers.

Many other countries' aviation COVID-19 aid has required a higher percentage of reimbursements, while other U.S. industries have not received the same government financial support.

The Covid crisis has led to a historic collapse in demand for air travel with US passenger air travel falling 60% in 2020 to the lowest level since 1984, a decline of more than 550 million passengers, as airlines cut costs and struggle to survive.

Since then, air travel has returned to pre-Covid-19 levels and could set a new record this year.