Summary
- US Treasury received $556.7M from airline stock warrants auction.
- Congress approved $54B in airline bailouts over 2020-2021.
- Bailouts protected jobs and infrastructure during pandemic.
The COVID pandemic was bleak for the global aviation industry, with air travel collapsing as much as 90%. Aircraft are incredibly expensive and unable to fly, and airlines would go bankrupt in short order. The US government stepped in and injected billions into the industry to keep it afloat and get it through the pandemic. As a sign that the airline industry is rebounding, the US Treasury Department stated it has received $556.7 million in proceeds from auctions. This follows on from earlier reporting that the Treasury planned to sell off COVID-era airline stock warrants. They had been expected to generate a little under $500 million.
Treasury receives half a billion in auction
Reuters reported on June 22 that the US Treasury Department received $556.7 million in “proceeds from auctions to sell warrants in 11 major US airlines the government received in exchange for COVID-19 assistance.”
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“The U.S. Department of the Treasury (Treasury) today announced that taxpayers received $556,685,001 from a series of auctions held from June 3 to 13, 2024, to sell its warrants for common stock of 11 publicly traded airlines.” US Treasury
The US Treasury also stated, “Treasury auctioned these warrants as part of its continuing post-pandemic efforts to recover value for taxpayers in an orderly, fair, and transparent manner. The assistance Treasury provided under these programs protected hundreds of thousands of jobs and helped maintain critical infrastructure capacity during the pandemic.”
Congress approved $54 billion in a series of airline bailouts in 2020 and 2021. Airlines were required to repay $14 billion of the total, and the Treasury received warrants for the purchase of stock at the then-current share price. The warrants are set to expire between April 2025 and June 2026.
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The suspicion is that the government funds were instead used to fund employee buyouts and early retirement packages.
Airline pandemic bailouts
The 11 crippled US-based airlines received billions in bailout funds and government assistance. According to Reuters, American Airlines received the most at $12.6 billion, then Delta Air Lines at $11.9 billion, United Airlines at $10.9 billion, and Southwest at $7.2 billion. These are considered the “big four” national American carriers.
The other seven publicly traded airlines also received billions (although considerably less than the big four). Notably, Alaska Airlines received $2.2 billion in assistance.
The $54 billion in direct payment came in three separate statues ($25 billion, $15 billion, and $14 billion). The government also extended $25 billion in low-cost loans to airlines, although only a fraction of this sum was ever used. The Treasury also suspended the 7.5% excise tax on domestic air travel and payments to airports and contractors.
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According to the Mercatus Center, the airlines had relatively few requirements. Airlines had to use the funds for payroll and maintain a minimum level of air service along existing routes. They were not permitted to furlough workers involuntarily or reduce pay or benefits. There were a few other limitations (such as limiting executive compensation).