U.S. grants tentative OK for 15 air carriers to suspend service to 75 airports By Reuters

© Reuters. FILE PHOTO: Delta Air Lines passenger planes parked in Birmingham


By David Shepardson

WASHINGTON (Reuters) – The U.S. Transportation Department said late on Friday it had granted tentative approval to 15 airlines to temporarily halt service to 75 U.S. airports because of the coronavirus pandemic.

Airlines must maintain minimum service levels in order to receive government assistance but many have petitioned to stop service to airports with low passenger demand.

Both United Airlines (O:) and Delta Air Lines (N:) won tentative approval to halt flights to 11 airports, while JetBlue Airways Corp (O:), Alaska Airlines (N:) and Frontier Airlines were approved to stop flights to five airports each. The department said all airports would continue to be served by at least one air carrier.

The Transportation Department said objections to the order can be filed until May 28.

U.S. air carriers are collectively burning through more than $10 billion in cash a month as travel demand remains a fraction of prior levels, even though it has rebounded slightly in recent weeks. They have parked more than half of their planes and cut thousands of flights.

The department has previously granted airlines waivers to cancel some additional flights and denied others. On May 12, the department said it would allow carriers to halt flights to up to 5% of required destinations.

Under the tentative order, Delta can halt service to Aspen, Colorado; Bangor, Maine; Flint, Michigan; Santa Barbara, California; and Lincoln, Nebraska, among other cities, while United can halt service to airports including Chattanooga, Tennessee; Hilton Head and Myrtle Beach, South Carolina; Key West, Florida; and Lansing and Kalamazoo, Michigan.

JetBlue can halt flights to Albuquerque, New Mexico;

Palm Springs and Sacramento, California; Sarasota, Florida; and Worcester, Massachusetts.

Alaska can suspend flights to Charleston, South Carolina;

Columbus, Ohio; El Paso and San Antonio, Texas; and New Orleans.

Only half of eligible carriers have applied to cut more flights.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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FDA grants Gilead’s remdesivir emergency authorization for COVID-19 treatment

The Food and Drug Administration on Friday granted an emergency use authorization to Gilead Sciences Inc.’s remdesivir, a decade-old experimental therapy first tested on Ebola disease patients, as a COVID-19 treatment.

President Donald Trump announced the news just as the markets closed Friday afternoon at the White House. The authorization means that the drug can be used by hospitalized patients with suspected or laboratory-confirmed cases of COVID-19 outside of clinical trials or on a compassionate use basis.

Gilead Chief Executive Daniel O’Day on Thursday night told investors during an earnings call that talks with the FDA about an emergency use authorization, or EUA, or other formal approval had intensified in the last 48 hours. “There’s a big sense of urgency,” he said, according to a FactSet transcript of the call. “We think the FDA will move quite quickly.”

Shares of Gilead

moved 1.9% higher in after-hours trading Friday immediately after the announcement. Year-to-date, the company’s stock has gained 23%, hitting a low of $62.23 on Jan. 21 before soaring to a $85.97 high for the year on March 19. It closed Friday at $79.95.

Read: Gilead expects to spend up to $1 billion on coronavirus drug this year, will donate 1.5 million vials

The antiviral drug has been widely considered a front-runner in the rush to find viable treatments for a disease that has sickened more than three million people worldwide and killed at least 220,000, according to data aggregated by Johns Hopkins University. It is the first new drug to get an EUA, a type of authorization that the FDA is using during the pandemic. The regulator in March authorized chloroquine and hydroxychloroquine to be repurposed for some COVID-19 patients though both drugs have previously been approved to treat other diseases, like malaria.

Investors and clinicians have been paying close attention to the snippets of study data about the antiviral drugs, sending the company’s shares up or down depending on the day.

Though experts have had mixed responses to the clinical findings so far, it’s clear that demand is high. There are no proven treatments for infections caused by the coronavirus, making it difficult for the nation’s health-care workers to care for the patients who end up in their emergency rooms and intensive care unit beds.

There’s also an economic angle. The market has been swinging in response to remdesivir data, driven by the investor stance that a proven treatment, even more so than vaccine, would support the prospect of an economic rebound for the U.S., which is thought to be headed for a recession due to the COVID-19 pandemic.

Gilead began developing remdesivir in 2009. It was later tested as a treatment for Ebola, severe acute respiratory syndrome (SARS), and Middle East respiratory syndrome (MERS), among other diseases. The company said it began providing doses of remdesivir to the China Centers for Disease Control and Prevention & Prevention in January when the coronavirus outbreak there began to worsen. By February, the investigational therapy had been moved into a number of clinical trials in the U.S. and abroad, including one conducted by the National Institute of Allergy and Infectious Diseases (NIAID).

That trial has been the one to watch, primarily because it had a placebo arm and two of the Gilead-sponsored trials do not. A preliminary data analysis released this week by the federal research agency found that the drug improved recovery times in COVID-19 patients — the median time to recover in that group of patients was 11 days — compared with 15 days in those patients taking placebo.

Though government officials including President Trump and Dr. Anthony Fauci, the NIAID director, have talked up the results, with Fauci saying remdesivir would become the standard of care in the treatment of COVID-19 patients, other medical experts have been more measured in their responses to the clinical-trial data.

“Remdesivir is an efficacious drug beyond recovery time (but not a miracle, or extremely potent one),” Dr. Eric Topol, director of the Scripps Research Translational Institute, tweeted this week

Half a dozen clinical trials testing remdesivir in COVID-19 patients have been launched since Chinese authorities first identified the virus late last year, according to ClinicalTrials.gov. However, two clinical trials in China have since been halted, and a medical study, published Wednesday in The Lancet, found that one of them, a randomized, double-blind, placebo-controlled, multi-site trial, didn’t report “statistically significant clinical benefits” in patients taking remdesivir. One positive finding was that remedesivir patients did have faster recoveries, though researchers urged confirmation studies.

See also:COVID-19 treatment yields disappointing data in trial and shows it’s not easy to develop drugs

During Gilead’s Thursday earnings call, which was monopolized by remdesivir questions, Chief Financial Officer Andrew Dickinson said the company may spend up to $1 billion in 2020 developing the drug.

“Under the emergency-use authorization, one could charge for the product,” CEO O’Day told investors on the earnings call. “We made a decision, as you know, to donate 1.5 million vials, which is the entirety of our supply through the early summer.” The vials encompass 140,000 10-day treatment courses. O’Day later said during the call that donating the investigational therapy “is the right thing to do at this time.”

Analysts later stressed their concerns about the company’s lack of clarity about revenue generation for a drug brought to market under emergency powers during a global pandemic with huge public health implications.

Raymond James’ Steven Seedhouse, one of at least three analysts to downgrade Gilead stock after the earnings call, cited the drug’s minimal impact on COVID-19 patients and the company’s unclear path to profitability for the drug. “It’s not clear to us if remdesivir will be used much in COVID beyond the initial 1.5M donated doses or beyond this near-term panic phase of the public health crisis,” he wrote.

“Remdesivir has been a big sentiment boost for GILD (if not the entire market) and the company should be commended for its efforts in so quickly addressing this public health emergency, but we still feel it’s unlikely to result in tangible long-term cash flows,” J.P. Morgan analysts told investors when they downgraded the stock.

SVP Leerink’s Geoffrey Porges, however, expects that Gilead will establish a business model for remdesivir. “The allocation process is likely to be challenging, controversial and ultimately highly political,” he wrote, “and once Gilead starts charging for the product we expect calls for the exercise of march-in rights and compulsory or no-cost licensing to become louder.”

Some lawmakers, including Reps. Lloyd Doggett, a Texas Democrat, and Rosa DeLauro, a Connecticut Democrat, have already raised questions about taxpayer investment in remdesivir. “The public deserves an accounting of what taxpayer investment enabled this hopeful COVID-19 treatment,” they wrote in an April 30 letter.

The S&P 500

is down 9.8% since the start of the year.

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Alaska air carrier RavnAir files for bankruptcy as U.S. Treasury mulls grants By Reuters

© Reuters.

By David Shepardson

WASHINGTON (Reuters) – RavnAir Group, the largest regional carrier in Alaska, filed for bankruptcy Sunday and grounded all of its 72 planes as it waits on a decision from U.S. Treasury for government assistance.

The Trump administration is weighing applications from numerous airlines as it considers how to disburse $25 billion in passenger airline grants, $4 billion for cargo carriers and $3 billion for airport contractors. Congress approved the bailout funds to help air carriers cover payroll costs.

RavnAir, which filed for Chapter 11 bankruptcy protection in Delaware, said Sunday it was suspending all operations and laying off all employees.

“We took these actions to ensure our airline has a future, and to give us time to ‘hit pause'” while it seeks Treasury grants and “other sources of financial assistance that will allow us to weather the coronavirus pandemic and emerge successfully once it has passed.”

In a letter posted Sunday, RavnAir Chief Executive Dave Pflieger said the airline was working to “resume the vital air service you depend on to get home to your families, to your businesses, to medical appointments, and to other duties that are essential to our communities and the state of Alaska.”

Delta Air Lines Inc (N:), American Airlines Group Inc (O:), Spirit Airlines Inc (N:), Southwest Airlines Co (N:), United Airlines Holdings Inc (O:) and JetBlue Airways Corp (O:) are among the airlines that confirmed they filed before a Friday deadline set by Treasury to get speedy consideration.

On Sunday, top Democrats including House Speaker Nancy Pelosi and Senator Charles Schumer urged Treasury Secretary Steven Mnuchin to move quickly and not impose unreasonable conditions on the grants. Airline unions and many Democrats object to Treasury demanding significant equity or warrants as a condition to the grants.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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U.S. airlines to dash for cash grants, not loans, even with potential government stake By Reuters

© Reuters. Delta Air Lines passenger planes parked in Birmingham

By Tracy Rucinski and David Shepardson

CHICAGO/WASHINGTON (Reuters) – U.S. airlines are preparing to tap the government for up to $25 billion in grants to cover payroll in a sharp travel downturn triggered by the coronavirus, even after the government warned it may take stakes in exchange for bailout funds, people familiar with the matter said.

After the U.S. House of Representatives approves the airline bailout and President Donald Trump signs it as early as Friday, airlines are to receive initial payments within 10 days.

Treasury Secretary Steven Mnuchin can demand equity, warrants or other financial instruments in order to “provide appropriate compensation to the federal government.” A Treasury spokeswoman declined to comment on a report that Mnuchin would demand equity.

Airlines can ask for the equivalent of their payroll between April 1 and Sept. 30 of last year, according to the terms of the bill, meaning some large airlines could get $4 billion or more in total.

Delta Air Lines (N:), for example, paid roughly $5.6 billion in salaries and related costs over the last six months of 2019 to around 91,000 full-time employees, according to regulatory filings.

Despite the prospects of payroll grants, airlines including Delta have already moved to reduce employee costs through temporary voluntary unpaid leave and early retirements.

More than 17,000 Delta workers such as flight attendants have already volunteered for unpaid leave for 30, 60 or 90 days, and Chief Executive Ed Bastian has asked employees to work only three or four days a week between April and June to save around 25% in payroll costs, according to a memo seen by Reuters.

With operations sharply cut back, airlines’ biggest expense right now is employee wages and the government grants give them around six months to reassess whether air travel demand is really returning.

In a company memo on Thursday, American Airlines Group Inc’s (O:) leaders said they were extending voluntary leave options to non-union employees after negotiating agreements with groups representing union jobs such as pilots and flight attendants.

“We are hopeful the uptake will be robust and are working hard to make sure all have the ability to continue employment, even if at reduced levels, while this crisis runs its course,” Chief Executive Doug Parker and President Robert Isom told their employees.

American had around 133,000 full-time employees in 2019, about 85% of whom were unionized. Executives at American and Delta are also forgoing or cutting their pay.

Aside from the grants, airlines without other available financing options can also apply for $25 billion in loans and loan guarantees under the rescue package.

Some major airlines, which continued to tap debt markets this week while lobbying Washington for aid, have told U.S. officials they may skip the government loans entirely, people familiar with the discussions said.

The 5-year government loans would carry tougher terms than grants or loans from private banks, and could burden balance sheets just as companies are trying to recover from the crisis.

“However, if demand trends don’t improve during the second half of 2020, we would not be surprised if some of the carriers began to express an interest in the loan program,” Deutsche Bank (DE:) analyst Michael Linenburg said in a note.

If they do, companies would have to restrict executive compensation and suspend dividend payments until 12 months after loan re-payment.

With the grants, limits on executive compensation would expire on March 24, 2022, and dividends and share buybacks can resume on Sept. 30, 2021.

Between loans and grants, American would be eligible for $12 billion, Parker said on Thursday. Despite uncertainty over exact funding conditions, he said he was “optimistic that the terms will not be onerous.”

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Airlines appear to come up short in bid to win cash grants in rescue package By Reuters

By David Shepardson and Tracy Rucinski

WASHINGTON/CHICAGO (Reuters) – A last-ditch effort by the chief executives of major U.S. airlines to try to win cash grants to weather the coronavirus crisis looked to be unsuccessful, four congressional aides and airline officials said late Saturday.

Airlines had made a last ditch plea urging that $29 billion of $58 billion sought in assistance for airlines be in the form of cash grants. They had offered not to make any job cuts through Aug. 31 if they won the cash and to accept restrictions on executive pay and to forgo paying dividends or stock buybacks.

The CEOs of 10 U.S. passenger and cargo carriers had said in a letter that without direct cash assistance, “draconian measures” such as furloughs may be necessary.

Senate Republicans hope to unveil the text of the rescue and stimulus package Sunday that could total $1.6 trillion and is set to include $50 billion in collateralized loan and loan guarantees for passenger airlines and $8 billion for cargo carriers. Senate Democratic Leader Charles Schumer said there was still “no deal,” so it is possible the final airline provisions could change in negotiations.

Senator John Thune, the Senate’s No. 2 Republican, said earlier airline grants were not winning backing “at this point, I don’t sense support for it here or with the administration. But like I said, nothing is done.”

Airlines are expected to soon turn their attention to applying for government collateralized loans and the terms the legislation will include. The initial Republican plan said the U.S. Treasury could demand stock, warrants or options as part of any airline loans.

The global coronavirus outbreak has forced airlines to cancel tens of thousands of flights and resulted in massive revenue losses. On Saturday, United Airlines said it was canceling 90% of its international flights in April.

United, Delta Air Lines (NYSE:), American Airlines (NASDAQ:) Group, FedEx (NYSE:), Southwest Airlines (NYSE:) Co, UPS and others warned in their letter to lawmakers on Saturday that “time is running out.”

They had urged Congress not to attach additional conditions.

“We respectfully urge Congress not to pursue opportunistic measures that will hurt, not help our ability to recover,” they wrote. Some in Congress want airlines to agree to provisions such as limiting baggage and other fees, or committing to flying more environmentally friendly airplanes.

Unions representing workers in different parts of the aviation industry also made final pleas, with the head of the International Association of Machinists and Aerospace Workers asking Congress to “backstop” the airlines with direct aid for paychecks.

The president of the Association of Flight Attendants, Sara Nelson, blasted Senate Republican Leader Mitch McConnell saying under his plan “airlines and airports will cut jobs, and the debt they’ll take on will lead to bankruptcies that will further hurt frontline aviation workers while executives get a free pass.” McConnell’s office did not comment.

Airlines Monday sought $58 billion in cash grants and loans equally divided, with $50 billion for passenger airlines and $8 billion for cargo carriers. They also sought billions in additional tax relief.

“The breadth and immediacy of the need to act cannot be overstated. It is urgent and unprecedented,” they wrote Saturday.

Other signatories to the letter were the chief executives of Alaska Airlines, JetBlue Airways, Hawaiian Airlines and Atlas Air Worldwide.

The Republican bill introduced on Thursday would set aside another $150 billion for a separate fund and Treasury would determine who could qualify. Boeing (NYSE:) Co, which has sought $60 billion in U.S. government loan guarantees for itself and the aviation manufacturing sector, could seek loans from that fund.

Senator Ted Cruz, a Republican, tweeted on Saturday that “some are pushing for a special carve-out just for Boeing & GE. That would be WRONG. Millions are losing jobs; we don’t need bailouts or corporate welfare – those companies should participate in the same liquidity programs as everyone else.”

Boeing on Friday agreed to suspend its dividend, not buy back stock and said its chief executive would forgo pay for the rest of 2020. Boeing and GE did not immediately comment Saturday.

Airport workers, many of whom are contracted, were also pleading with Congress to ensure that they too are protected in any bailout.

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