Exclusive: Major U.S. airlines plan to apply for government loans in addition to grants: sources

(Reuters) – Numerous major U.S. airlines are preparing to apply this week for a $25 billion U.S. government loan program after winning billions in federal payroll grants, people familiar with the matter said.

The U.S. Treasury told airlines to apply by Friday if they want priority consideration, according to documents posted on its website.

An airline official told Reuters most airlines are expected to apply in part because they will not be required to draw down the loan before the end of September and the terms are favorable.

American Airlines Group Inc (AAL.O) confirmed on Tuesday it plans to apply for a $4.75 billion loan ahead of the Friday deadline set by Treasury for priority consideration. Alaska Airlines Inc [ALKAIR.UL] said it would apply for $1.1 billion in federal loans.

Among other large carriers, United Airlines Holdings Inc (UAL.O) and Southwest Airlines Co (LUV.N) will also apply, while Delta Air Lines (DAL.N) was still considering it, the people said. Another industry person said all the major carriers would likely apply with the exception of Spirit Airlines (SAVE.N).

While some airlines had initially planned to tap only the $25 billion in federal payroll grants, there is now a growing realization that the terms of the separate government loan package may be significantly better than those available in capital markets, the people said.

Treasury agreed in principle on Tuesday to award the payroll assistance to airlines but will not release the funds all at once.

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