Alaska Airlines and Horizon Air finalized agreements today with the U.S. Treasury Department and accepted full disbursement of the agreed $992 through the Payroll Support Program (PSP) under the Coronavirus Aid, Relief and Economic Security (CARES) Act.
The $992 million comes in the form of a $725 million grant and $267 million loan, to be used exclusively toward continuing to pay employee salaries, wages and benefits. The funding will cover about 70% of budgeted payroll costs for both airlines until September 30.
Brad Tilden, Alaska Air Group chief executive said, "This support enables us to protect jobs and maintain critical transportation infrastructure while we work over the next few months to assess our business and make thoughtful decisions."
The $267 million loan must be repaid to the government within a 10-year term. Additionally, the Treasury Department has received warrants to buy 847,000 non-voting shares of Alaska Air Group common stock at a price of $31.61 a share, which was the closing price of the stock on April 9, 2020.
Under this program, Alaska and Horizon have agreed to additional conditions such as no involuntary furloughs and no reductions to rates of pay or benefits until September 30, to continue suspension of dividends and share repurchases until and make limits on executive pay.
Alaska and Horizon have separately applied for $1.1 billion in federal loan funding through a separate program authorized under the CARES Act. Funds loaned to both airlines through this program will support short-term liquidity needs and must be paid back in full.
If finalised, the term of the secured term loan agreement would be five years and provide for the Treasury Department to receive warrants to buy additional non-voting shares of Alaska Air Group common stock amounting to 10% of the loan value at a price of $31.61 a share. Discussions with the Treasury Department on this loan are still ongoing.