Democrats press U.S. Treasury to move quickly on $32 billion aviation grants

Top Democrats in Congress on Sunday urged the U.S. Treasury not to set “unreasonable conditions” in awarding $32 billion in cash assistance to airlines and airport contractors and warned that they could be forced to file for bankruptcy if the requirements are too onerous.

Airline unions have raised concerns that Treasury Secretary Steven Mnuchin will demand too much in equity, warrants or other financial instruments in exchange for the government assistance meant to cover some payroll costs approved by Congress last month.

In a letter Sunday, House Speaker Nancy Pelosi, Senate Democratic Leader Chuck Schumer, House Transportation Committee chairman Peter DeFazio and Senator Sherrod Brown urged Treasury “to quickly and fairly enter in to direct payroll assistance agreements.”

Some officials have raised concerns that if Treasury demands too much, airlines could opt to file for bankruptcy instead.

The lawmakers’ letter said the goal was to provide payroll help for airlines and contractors “recognizing that bankruptcy is in neither those companies’ nor their employees’ interest.... Assistance must not come with unreasonable conditions that would force an employer to choose bankruptcy instead of providing payroll grants to its workers.”

The bill provides for $25 billion in payroll assistance grants to passenger airlines, $4 billion for cargo carriers and $3 billion to contractors like caterers and airplane cleaners.

Delta Air Lines Inc, American Airlines Group Inc , Spirit Airlines Inc, Southwest Airlines Co , United Airlines Holdings Inc and JetBlue Airways Corp are among the airlines that confirmed they filed before a Friday deadline set by Treasury to get speedy consideration.

Others like FedEx Corp said they were eligible, but declined to say if they applied.

Congress gave Mnuchin discretion to ask airlines and contractors for equity or other compensation on grants. He is required to seek compensation for up to $29 billion in loans for airlines.

Treasury told airlines to propose potential compensation as part of their applications.

Treasury did not immediately respond to a request for comment. Mnuchin said Thursday the government would move quickly and said he would “strike the right balance -- not a bailout out -- taxpayers get compensated... We want to keep our airlines intact.”

Mnuchin confirmed PJT Partners Inc will advise the Treasury on passenger airline negotiations, while Moelis & Co will advise the Treasury on its negotiations with cargo carriers.