Alaska Airlines And Horizon Air To Receive Almost $1 Billion In Aid

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Alaska Airlines has announced details of the government assistance it will receive through the Payroll Support Program (PSP) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The April 14th release indicates that the airlines will receive a total of $992 million in funding to support the airline.

Alaska Airplane
Alaska Airlines will receive just under $1 billion in support. Photo: Alaska Airlines

Alaska and Horizon to receive $992 million in funding

The $992 million will come through the Payroll Support Program. Of this amount, $267 million will come in the form of a loan that must be repaid to the government. Also, the US Department of Treasury will have the right to purchase 847,000 non-voting shares of the Alaska Air Group for $31.61 per share.

The airline will have to adhere to strict terms on stock buyback suspensions and executive compensation. Photo: Alaska Airlines

The funding will go to support 70% of the airline’s budgeted costs through September 30th. Through this grant, no employees will face involuntary furloughs or pay cuts. Through September 30th, 2021, there will be a suspension of dividends and share buybacks. Finally, until March 24th, 2022, the terms of the financing dictate limits on executive compensation.

Alaska Airlines, Capacity, Flights Cut
No employees will be involuntary furloughed or receive pay cuts through September. Photo: Getty Images

Chairman and CEO of Alaska Air Group, Brad Tilden expressed his appreciation of the support and offered the following statement about the airline’s employees:

“Our employees are tremendous, serving our guests and running a safe and reliable operation every day. They’ve continued to do so through this crisis, to safely fly those who need to travel, deliver critical groceries, supplies, and other cargo across our network, including remote parts of Alaska. This federal support enables us to take care of them through a time of near-zero revenue.”

Alaska to apply for a further loan

Alaska and Horizon will apply for an additional $1.128 billion in federal loans also through the CARES Act. This loan will support Alaska’s operations and must be paid back in full.

Alaska Airlines
The airline intends to apply for a further loan. Photo: Getty Images

Maintaining minimum service

Alaska Airlines must maintain minimum services as outlined by the Department of Transportation. Because Alaska Airlines has a market share of less than 10% per the Bureau of Transportation Statistics, the amount of service it must provide is less than that of the other major US carriers. Alaska Airlines only needs to service a destination three times per week for cities it currently flies to five or more times per week. To cities receiving service less than five times per week, the airline only needs to provide one flight per week.

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Alaska airlines mountain
Service to some of the most isolated cities in Alaska will continue. Photo: Alaska Airlines

Under this program, Alaska Airlines will need to continue to provide service to some of America’s most isolated communities in the state of Alaska. Although there may not be enough passenger demand, some of those communities rely on the airline to bring in much-needed cargo.

Horizon Air, Alaska’s regional arm, will also receive funding. Photo: Simple Flying

CARES Act funding to airlines

Alaska Airlines joins American, Delta, and United in receiving government aid. The terms of receiving assistance are mostly similar across these airlines with variations based on the airline’s cash needs. Needless to say, this funding will help save some jobs in the industry and keep airlines afloat.

Alaska san francisco bay
The airline has a strong West Coast presence. Photo: Alaska Airlines

American, Delta, and United, however, are receiving support five times that of Alaska Airlines. This is in part due to the airline’s smaller size in the United States. The carrier mainly operates out of the West Coast of the US and Alaska. However, Alaska does have a presence on lucrative transcontinental flights.

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Overall

Alaska Airlines becomes the next airline to receive government assistance under the CARES Act. $992 million in payroll support will keep the airline from furloughing employees or cutting pay through September 30th with additional conditions. However, the carrier will apply for a further $1.128 billion to support its operations.

What do you make of the support Alaska Airlines is getting? Let us know in the comments!

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