Southwest Airlines Co. today announced it has reached an agreement in principle with the United States Department of Treasury about the general terms expected on the Payroll Support Program (“program”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). Under the agreement in principle, Southwest will receive the funding support necessary to protect the jobs of its more than 60,000 Employees through at least September 30, 2020, with the fundamental goal to maintain the carrier’s unprecedented 49-year history absent a single involuntary furlough.
“We are extremely appreciative of the work of our federal leaders. President Trump, Secretaries Mnuchin and Chao, and the entire United States Congress recognize the unprecedented health and economic crisis that our nation is currently facing due to COVID-19, as well as the importance of airlines to our overall national economy, the supply chain, and the nation’s future recovery after this crisis subsides,” said Southwest Chairman and CEO Gary Kelly.
“As we are now in the implementation phase of the CARES Act, we applaud the quick action by the U.S. Department of Treasury to infuse liquidity into the economy and try to keep businesses open and people on the job—and that certainly includes the airlines and our Employees. So, on behalf of Southwest Airlines, my sincere thanks to Secretary Mnuchin and his entire team, who have been working so incredibly hard over the past few weeks to implement the core elements of the CARES Act.”
The Company’s expected disbursements under the program total more than $3.2 billion, consisting of more than $2.3 billion in direct payroll support and a nearly $1 billion unsecured term loan (“loan”). The loan is expected to have a 10-year term with low interest rates and may be repaid at any time prior to maturity at par. The loan is expected to include approximately 2.6 million warrants issued to the U.S. Department of Treasury. The program includes certain conditions, such as: prohibitions against involuntary furloughs and reductions in employee pay rates and benefits through September 30, 2020; the elimination of share repurchases and dividends until September 30, 2021; and limits on executive compensation until March 24, 2022.
The general terms described above are subject to the negotiation and execution of final documents between the Company and the U.S. Department of Treasury.