Alaska Airlines And Horizon Air Receive Almost $1 Bln In Aid

Alaska Airlines and Horizon Air said that they finalized agreements with the U.S. Treasury Department and accepted full disbursement of funds through the Payroll Support Program under the Coronavirus Aid, Relief and Economic Security (CARES) Act.

Alaska and Horizon have received $992 million 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 through September 30, 2020.

Of the $992 million in funding, $267 million is in the form of a loan and must be repaid to the government within a 10-year term. In addition, 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 per share, which was the closing price of the stock on April 9, 2020.

As per the program, Alaska and Horizon have agreed to additional conditions such as no involuntary furloughs and no reductions to rates of pay or benefits through September 30, 2020; to continue suspension of dividends and share repurchases until September 30, 2021; limits on executive compensation through March 24, 2022; and to maintain the minimum levels of air service as required under a Department of Transportation rule.

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 finalized, 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 per share. Discussions with the Treasury Department on this loan are still ongoing.

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