Can they be saved? Travel industry winners and losers of federal bailout

When it comes to the economic toll from the coronavirus, few sectors have taken a bigger hit than travel. 

Now comes the test to see whether the federal stimulus package is big enough and structured in a way that will allow airlines, hotels, cruise lines and other travel businesses to make it over the hump until Americans are ready to travel again.

More than two weeks after President Donald Trump signed the $2 trillion federal stimulus to bail out companies large and small, details are emerging that point to winners and losers in the travel sector.

Though called a stimulus, there's not a lot of travel business at the moment to stimulate. "It's really a relief package," said Tori Emerson Barnes, executive vice president for the U.S. Travel Association.

On its face, the package looked like a winner for the airline industry, which was singled out for a $50 billion chunk of the cash. Other travel-related businesses were largely left to jostle for dollars with others in all types of industries.

As the Treasury Department has set rules and conferred with companies – and as lawyers have dug into the fine print – the view has become more nuanced. There are still details to be worked out that could dramatically change the result, but here's the scorecard when it comes to the bill so far.

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Winners: Big airlines 

Large airlines, through their lobbying organization, hailed the stimulus when it was signed not only because it dealt them that hefty $50 billion overall but because it was backed by Trump's repeated comments that they were a high priority. 

Some of that enthusiasm dipped as the Treasury Department let it be known that any grant or loan will come with strings attached.

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There's been one holdup. Airlines executives balked at a provision involving $25 billion of the $50 billion that was earmarked for paying employees' salaries and a demand they hand over stock warrants for 10% of it, The Associated Press reported.  

Nevertheless, Treasury Secretary Steven Mnuchin released a list of the airlines that agreed to participate so far. They include Alaska, Allegiant, American, Delta, Frontier, Hawaiian, JetBlue, United, SkyWest and Southwest.

American, in a note to employees, said it will receive $5.8 billion, consisting of a grant of $4.1 billion and a loan of $1.7 billion under the program, to keep all its employees on the payroll through Sept. 30 "at which point we hope and expect that Americans are regularly flying again." The airline also said it plans to apply for a loan of $4.7 billion this week to help it stay afloat.

"We have had very good discussions with the airlines," Trump said Monday.

Losers: Smaller and deep-discount airlines

The Treasury Department issued a statement last week saying it would exempt smaller airlines from some of the requirements it imposes on the majors.

"We specifically created an exemption for small airlines that we can process very quickly," Treasury Secretary Steven Mnuchin said Monday.

Even with that concession, regional airlines, those that fly the small commuter airlines on routes from towns that feed into major airlines' systems, and deep-discount, no-frills carriers such as Frontier and Allegiant raised other concerns.

The Regional Airline Association said in a statement it has been trying to get the department to understand its members face unique issues related to their relationship with mainline airlines, such as whether they control their own tickets and pricing. 

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Regional airlines and no-frills carriers fret about rules in the bill that require them to maintain their route networks even though many flights take off with only a handful of passengers. Spirit Airlines, saying it is in "survival mode," requested an exemption from the rule and submitted a list of 26 cities it would like to discontinue serving, including New York, Minneapolis/St. Paul, San Francisco and Indianapolis. Allegiant, saying its passenger traffic has fallen 90% from normal levels, wants to drop 21 cities, including Albuquerque and Tucson.

Winners, sort of: Hotels

The American Hotel & Lodging Association supported the original stimulus, as did many of the nation's largest hotel chains.

But there's a mismatch when it comes to hotels' needs, Barnes said. Much of the money available to them is to pay staff salaries, but 60% of a hotel's expenses are fixed costs, so they want the program modified to give them more latitude in how they use the federal money.

There's also the need to offer more aid to smaller hotels. The association wants Congress to pass a $250 billion small-business loan measure, as well. The Trump administration has pushed for the additional aid because it has already doled out $220 billion of the $350 billion in the stimulus package, Mnuchin said Monday. "We don't want to run out of that money," he said about the need for the new measure. "We don't want to create panics that people won't get it."

Hotel revenue has declined nearly 70% in recent weeks and is likely to soften even more, the hotel association said in a letter sent to congressional leaders last week.

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Winner: Amtrak

Just like the airlines, Amtrak said its customers are staying home instead of taking the rails. Passenger counts are down about 90%. 

To keep the trains running, Transportation Secretary Elaine Chao announced last week that the national passenger rail network is going to receive a $1 billion cash infusion. About $492 million will go to support service in the Northeast corridor.

The money will come from the Federal Railroad Administration, part of the Department of Transportation. 

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“This $1 billion in federal emergency assistance to Amtrak will help maintain service for its passengers when the economy recovers,” Chao said in a statement.

Also like airlines, Amtrak has reduced service in response to the traffic decline.

Losers: Cruise lines

Cruise ship operators registered in foreign countries were shut out of the stimulus deal, which was intended to benefit U.S. companies only. As a result, they are scrambling to raise enough cash to tide themselves over.

One of the largest, Carnival, took on an additional $4 billion in debt and sold 71.9 million shares of stock, Bloomberg News reported. Saudi Arabia's Public Investment Fund disclosed it has taken an 8.2% stake in Carnival, betting big on an uncertain future.

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Barred by the United States from operating cruise ships for three months unless the coronavirus disappears so fast that it's no longer considered a public health threat, major cruise lines face the prospect of trying to win back vacationers shaken by the news of ships on which COVID-19 resulted in deaths and illnesses among passengers and crew and forced some ships to travel thousands of extra miles when countries barred them from ports.

Besides airlines, Trump has repeatedly mentioned the cruise ship industry as deserving of aid. If it happens, it will probably take separate legislation.