In an exclusive report by Reuters, American Airlines Group Inc. (American Airlines) is aiming to hire one of Wall Street’s most successful bankers, Guggenheim Securities co-chairman, James Millstein for advice on the proposed a $50 billion industry relief package.
Sources reported that the rescue package for the airline had to be released from the US Treasury Department under the program for restructuring with the coronavirus pandemic.
American Airlines’ Negotiation
Millstein, who formerly worked as the chief architect of the Obama administration’s overhaul of certain financial firms, has worked on issues related to bankruptcies and other financial challenges of several US conglomerates over the last two decades, including representing unionized workers in labor negotiations with General Motors Co. and other automakers.
Millstein also earlier worked with American Airlines CEO, Doug Parker at the time of merger agreement between US Airways and American Airlines in 2013. Parker was the then CEO of US Airways before assuming the same role in the combined company.
The US government has introduced last week coronavirus relief legislation which could provide up to $25 billion in loans and additional $25 billion in direct cash grants guaranteed for US airlines that have been hit by the virus outbreak. While it was not yet sure about whether American Airlines would seek government aid, Millstein’s anticipated appointment indicated that the airline would be entering negotiations with Treasury officials.
Last week, American Airlines announced to reduce its operating capacity of about 60% in April and up to 80% in May considering the sharp decline of air travelers. The company revealed that it had accessed nearly $7.3 billion of liquidity while the total debt of the company till December was about $23.9 billion.
The CEO of American Airlines, Parker said last week that the company would be eligible for up to $12 billion US government relief assistance and added that combining government relief with a “relatively high available cash position” would “allow us to ride through even the worst of potential future scenarios.”
Meanwhile, Parker explained there were some challenging terms related to the access to cash grants and it was yet uncertain whether the company would be meeting the necessary conditions of the funds provided by the government. He added, such terms of the fund aids “will not be onerous.”
The key challenge was that the company needed to accept the conditions given by the US government in availing of the fund. The terms of conditions included such as continuing to fly in and out of all U.S. airports that currently have commercial air service, and also agreeing to avoid involuntary furloughs of employees, both through the end of September.
Moreover, the term of the aid prohibited the executives from performing tasks such as compensation and stock buybacks, as well as suspension of dividend payments. Nevertheless, the United Airlines Holdings Inc. and Delta Air Lines, the two other leading US carriers, have shared their cautious optimism about the government assistance, while suggesting that the government initiatives would be required to stabilize their businesses.
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