Federal Government Reportedly Planning to Take Stakes in Airlines

The federal government is reportedly planning to take stakes in airlines in exchange for $25 billion in grants as part of the $2 trillion coronavirus relief bill passed by the Senate this week, according to The Wall Street Journal.

Citing “people familiar with the matter,” The Journal reports that Treasury Secretary Steven Mnuchin shared the details during last-minute negotiations on the $50 billion airline package, which is split evenly between loans and direct grants.

However, a Treasury Department source familiar with the negotiations told Travel Weekly that the legislation “does not require equity stakes” and another source familiar with the bill reaffirmed to The Hill that compensation for the grants wouldn’t necessarily have to come in the form of an equity stake.

“The Secretary may receive warrants, options, preferred stock, debt securities, notes, or other financial instruments issued by recipients of financial assistance,” section 4117 of the bill states, per The Hill. A warrant would give the federal government the option to buy shares of stock at a certain price.

The airline industry has been reeling in recent weeks as the coronavirus pandemic has prompted a plunge in demand as well as numerous government restrictions on travel as officials aim to slow the spread of illness around the world.

Airlines have been forced to reduce service and cut staff as nationwide passenger numbers have plummeted from well over 2 million per day to just over 200,000.