Southwest Airlines (LUV) said it would apply for industry assistance offered in the coronavirus stimulus bill signed by President Donald Trump last week, amid an unprecedented drop in travel demand. Southwest stock and other airline stocks fell.
Meanwhile, an analyst on Thursday estimated that about half the world’s jets are currently parked. Older jets, she said, may never come back.
In a regulatory filing on Thursday, Southwest said it would file an application with the Treasury Department “in order to discuss the specific details regarding possible grants that could boost liquidity and provide job security” for the time period of April 1 through Sept. 30.
Southwest also said it would draw on an extra $2.3 billion from a credit line to help stabilize its finances. The company did not immediately respond to a request for comment.
The stimulus package offers passenger carriers $25 billion in cash infusions, which the airlines don’t have to repay, and another $25 billion in loans. To get that money, airlines can’t cut employee pay or furlough staff involuntarily through September of this year. They also can’t hand out dividends or buybacks until next September.
The carriers also have to maintain service to some destinations. The Transportation Department on Tuesday said airlines that receive stimulus aid would be allowed to consolidate some flights into a single plane.
Last week, American Airlines (AAL) said it believed it was eligible for around $12 billion of stimulus aid. Delta Air Lines (DAL) and United Airlines (UAL) both said on Monday that they were still determining how much money they might seek.
Airlines have cut flight schedules, slashed costs and tapped the credit they have to cushion themselves as the coronavirus pandemic broadsides the economy. Jobless claims skyrocketed last week to 6.6 million.
Southwest Stock, Airline Stocks
Southwest stock fell 0.4% in the stock market today. Shares of Southwest and other airline stocks plummeted through February and March as travelers, scared of catching the virus, canceled flights and governments around the world restricted air travel.
Among other airline stocks, Delta stock dipped 0.5%. American Airlines stock lost 1.6%. United Airlines stock fell 1.8%.
Cowen analyst Helane Becker, in a research note on Thursday, estimated that as much as half the globe’s jet fleet was currently parked.
Once the airline industry emerges from the current crisis, she said it would likely have jets that were newer and more fuel efficient.
“While many of these will be temporary storage, many of these aircraft will never resume service,” she said. “We believe the airline industry will look very different when we get to the other side of this.”
Source: Investor’s Business Daily
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