Southwest Air Is Second Carrier to Seek Part of Government Bailout

Southwest Air follows American Airlines in asking the government for help after the industry collapsed due to travel restrictions caused by the coronavirus pandemic.
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Southwest Airlines  (LUV) - Get Report said that it intended to apply for federal aid from the $61 billion package Congress approved for the airlines last week. 

That $61 billion in aid includes $25 billion in cash grants and as much as $32 billion in payments for airlines to keep employees on their payrolls. 

Southwest is seeking up to $12 billion in aid. The Dallas carrier also said it tapped $2.3 billion from an amended credit agreement to help fund its operations. 

The airline said it would file an application "to discuss the specific details regarding possible grants that could boost liquidity and provide job security for employees," according to a regulatory filing.

American Airlines  (AAL) - Get Report has already asked the government for help after the industry collapsed due to travel restrictions caused by the coronavirus pandemic.

Airlines looking for federal aid are required to propose up front how the federal government could retain financial stakes in their companies.

Other guidelines say the airlines must submit evidence that they do not have access to credit elsewhere; describe covered losses, explain how the loans will be used, and outline an operating plan for the rest of 2020 and cost-restructuring plans. 

The aid conditions, as laid out by Congress, include use of funds for employee wages and benefits. They require the carriers to refrain from layoffs, furloughs or reduced wages until Sept. 30 and execute no stock buybacks or declare dividends to holders until September 2021. 

Applications for the aid are due by Friday. 

At last check Southwest shares were 2.2% higher at $32.75. Shares of American Air, Fort Worth, Texas, were 2.3% up at $10.93.