The federal government will own airline stakes

The federal government plans to take ownership stakes in
airlines that accept bailout cash, the Wall Street Journal reports. The move
would be facilitated by an option clause in the $2 trillion economic stimulus
package that was passed unanimously by the Senate on March 25. 

The stimulus bill calls for $25 billion in grants to U.S.
passenger carriers and $4 billion to cargo carriers. It was negotiated by congressional
leaders of both parties and the White House. The bill replaced an earlier
Republican draft that would have provided passenger air carriers $50 billion in
loans but no grants. 

According to the Wall Street Journal, treasury secretary
Steve Mnuchin said during last-minute negotiations over the airline package
that the government would take stakes in carriers in exchange for aid. The
paper cited “people familiar with the matter,” in the report. 

A clause in the bill, titled Taxpayer Protection, states
that the federal government may, at its discretion, use one of several
potential financial instruments from airlines as compensation for providing the
grants. Those instruments include preferred stock, options, debt securities,
notes or warrants.

A Treasury Department source familiar with the negotiations noted
to Travel Weekly on Thursday that the bill “does not require equity stakes.”

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