Airlines wait as Treasury applies strings to payroll aid

The Treasury Department has missed a deadline to start paying airlines to keep workers employed, and the two sides were still negotiating terms of the federal help Monday.

The chief holdup is Treasury’s insistence that some of the $25 billion in payroll assistance be in the form of loans, not cash.

The impasse suggests that airlines will face a harder job getting federal help than they expected. Airline stocks fell Monday.

The airlines thought they had a deal last month: Congress agreed to give passenger airlines $25 billion in cash grants to cover payroll costs for six months.

But Treasury Secretary Steven Mnuchin told CEOs of the six largest airlines on Friday that 30% of the aid instead would be low-interest loans that they would have to pay back with securities that could be converted to stock —giving the government an ownership stake in the carriers, according to people familiar with the negotiations.

That surprised the airlines.

“We believe the law indicated that the (direct aid) funding was to be only in grants — which is considerably more effective for our employees — and not a combination of grants and loans,” a spokeswoman for the trade group Airlines for America said in a statement. “This federal relief is critical to getting our employees paid and preventing furloughs right now, especially as our country is experiencing historically high unemployment claims.”

Airline labor unions are also urging Treasury to start distributing the grants, which were due to be paid out beginning April 6, 10 days after President Donald Trump signed the $2.2 trillion coronavirus-relief measure. Leaders of 11 unions pressed Mnuchin on the matter in a letter, writing that if the grants are delayed any longer, workers will lose their jobs “and our aviation...