Alaska Airlines and Horizon Air have agreed to general terms with the U.S. Treasury regarding their participation in the Payroll Support Program (PSP) under the Coronavirus Aid, Relief and Economic Security (CARES) Act.
The program will provide Alaska and Horizon with a total of US$992 million, to be used exclusively for the cost of employee payroll and benefits. The funding is expected to cover about 70% of budgeted costs through Sept. 30, 2020, and was based on similar costs reported by the airlines for the period of April through September 2019.
Of the US$992 million in funding to be disbursed under the PSP, US$267 million will be in the form of a loan and must be repaid to the government. Additionally, the Treasury will receive the right to buy 847,000 non-voting shares of Alaska Air Group at a price of US$31.61/share.
Under this program, Alaska also agreed to additional conditions such as no involuntary furloughs or changes to rates of pay through Sept. 30, 2020, continued suspension of dividends and share repurchases until Sept. 30, 2021, limits on executive compensation through March 24, 2022, and continuation of service as reasonable and practicable under a Department of Transportation rule.
Alaska and Horizon also communicated to the Treasury their intent to apply for US$1.128 billion in federal loans through a separate program authorized under the CARES Act. This process is still ongoing. Funds loaned to Alaska and Horizon through this program will support short-term liquidity needs and must be paid back in full.
