Changelog

2026-02-23 — Initial publication.

Introduction: The Unprecedented Intervention

On March 27, 2020, with U.S. airline passenger volumes having collapsed 90% in three weeks, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), allocating $54 billion in federal support specifically to airlines. This represented the largest government intervention in airline finance in U.S. history—exceeding post-9/11 support, exceeding Cold War aviation subsidies, and unprecedented in scale and speed.

The $54 billion was structured in two primary components: (1) the Payroll Support Program (PSP), providing $25 billion in grants and low-interest loans to preserve airline employment; and (2) the National Carrier Loan Program, providing $25 billion in Treasury loans to major carriers. Additional funds ($4 billion for cargo carriers, $3 billion for contractors) brought the total to $57 billion, though the airline-specific funding is most material.

This article documents the structure of CARES Act airline support, identifies which carriers received funding, traces repayment status as of February 2026, and assesses the impact on airline capital structure and creditworthiness. Understanding CARES Act terms and repayment is critical for airport finance professionals evaluating airline long-term viability.

Background: The COVID-19 Crisis and Aviation Collapse

When COVID-19 pandemic spread globally in March 2020, the U.S. aviation system ground to a halt. Travel restrictions, lockdowns, and consumer fear eliminated demand overnight. In the week of March 9-13, 2020, U.S. airline passenger volumes fell 50% versus the previous week. By March 23, passenger volumes were down 90% from year-ago levels.

With no passengers to generate revenue, airlines faced a liquidity crisis. Payroll, debt service, fuel costs, and ground costs continued regardless of revenue. Cash burn rates were extraordinary—estimates suggested major airlines were losing $100+ million per week.

Airlines requested government assistance immediately. On March 16, 2020, the airline industry trade groups requested $54 billion in federal support. By March 25, the CARES Act, negotiated in Congress, included exactly $54 billion for airlines.

The speed was extraordinary. From pandemic recognition to federal support legislation took 2 weeks. This was a departure from normal U.S. legislative process, reflecting the systemic importance of aviation to the U.S. economy.

The Payroll Support Program (PSP): Structure, Grants, and Loans

The Payroll Support Program had three tranches: PSP1 (initial program), PSP2 (extension), and PSP3 (further extension).

PSP1 (Enacted March 27, 2020): $25 Billion

The initial Payroll Support Program allocated $25 billion to passenger carriers, $4 billion to cargo carriers, and $3 billion to contractors (ground service, repair facilities, etc.). The key terms were:

• Allocation Formula: Funds were distributed to carriers based on payroll expenses from April 2019 through September 2019. The three largest carriers (American, Delta, United) received roughly $5 billion each. Southwest received ~$3.2 billion. Smaller carriers received proportionally lower amounts.
• Grant vs. Loan: PSP1 was split 70% grant, 30% loan. The grant portion was pure aid with no repayment obligation. The loan portion was a 10-year note at 1% interest for the first 5 years, then SOFR+2% for the final 5 years.
• Use of Funds Restriction: All PSP funds had to be used exclusively for payroll, salaries, and benefits. Airlines could not use PSP funds for debt service, capital investments, or shareholder returns. This was enforced by quarterly certifications.
• Restrictions on Capital Actions: Carriers receiving PSP funds were prohibited from (1) repurchasing stock, (2) paying dividends, (3) increasing executive compensation above 2019 levels, and (4) making certain types of acquisitions.
• Warrants: For carriers receiving more than $100 million (all major carriers), the government received warrants to purchase common stock at formulas tied to the support amount. Warrants gave the government equity upside if carriers performed well, though the exact terms were complex.

PSP2 (Enacted December 27, 2020): $15 Billion

PSP2 extended the program through March 31, 2021. The $15 billion was allocated on the same formula as PSP1 (payroll-based allocation). Terms were similar: 75% grant, 25% loan. The interest rates and warrant provisions were comparable to PSP1.

PSP3 (Enacted March 11, 2021): $14 Billion

PSP3 provided additional support through September 30, 2021. The $14 billion was again allocated on payroll basis. All terms were similar to PSP1 and PSP2: roughly 70% grant, 30% loan, 1% interest for first 5 years, then SOFR+2%.

Total PSP Impact: The three tranches provided $54 billion in total support to airlines. The split was approximately $37 billion in grants (no repayment) and $17 billion in loans (10-year repayment obligation). For the major carriers, the grants essentially covered 6-9 months of payroll costs, buying time for operations to normalize.

The National Carrier Loan Program: $25 Billion in Treasury Loans

The CARES Act also created a separate National Carrier Loan Program (not part of PSP) providing $25 billion in Treasury loans to major carriers. The program was less generous than PSP:

• Loan Terms: 10-year loans with 2% interest rate. Principal repayment began in year 4 of the loan.
• Collateral: Loans were secured by aircraft (EETC-like structure). The government received liens on aircraft collateral, allowing repossession if the airline defaulted.
• Allocation: The program was designed for major carriers. American, Delta, and United were eligible. Southwest and other carriers could apply. However, only $3.5 billion of the $25 billion available was actually drawn by carriers. Why? Because once liquidity improved in summer 2020 and capital markets reopened, airlines preferred to raise capital through EETCs and loyalty securitizations (discussed in separate article) rather than take on government loans with aircraft collateral.
• Restrictions: Similar restrictions on capital actions (no stock buybacks, no dividends, no executive compensation increases).

Why Low Take-up? The National Carrier Loan Program had stronger repayment obligations and collateral requirements than PSP. By summer 2020, capital markets were reopening and airlines could access cheaper capital through EETC issuances ($50+ billion issued 2020-2021 by U.S. carriers). Taking a Treasury loan with aircraft liens and mandatory repayment made less sense if cheaper capital was available.

Major Carrier CARES Act Allocations (PSP + Loans)

The three major U.S. carriers received the largest CARES Act allocations:

American Airlines: ~$5.8 billion in PSP1/2/3 (combining all three tranches) plus ~$2.2 billion in National Carrier Loan Program loans = ~$8 billion total. (American also later securitized its AAdvantage loyalty program for $10 billion, using those proceeds to repay CARES Act loans early.)

Delta Air Lines: ~$5.5 billion in PSP funding plus ~$1.6 billion in National Carrier Loan Program loans = ~$7.1 billion total. (Delta later refinanced with SkyMiles securitization for $9 billion, using proceeds to repay government support.)

United Airlines: ~$5.4 billion in PSP funding plus ~$1.5 billion in National Carrier Loan Program loans = ~$6.9 billion total. (United securitized MileagePlus for $6.8 billion, using proceeds to repay government loans.)

Southwest Airlines: ~$3.2 billion in PSP funding. Southwest did not draw on National Carrier Loan Program (had better liquidity position from lower debt levels and operational efficiency). As of February 2026, Southwest has repaid its PSP loan portion and technically completed CARES Act repayment obligations ahead of schedule.

Smaller Carriers (JetBlue, Alaska, Hawaiian, Spirit, Allegiant, Frontier, etc.): Combined received ~$4 billion in PSP support. Most have repaid or are on track to repay loan portions. Some (Spirit) have used bankruptcy to restructure or reduce CARES Act obligations.

Repayment Status as of February 2026

As of February 2026, the repayment status of CARES Act support is as follows:

PSP Grants ($37 billion total): These required no repayment. All carriers retained these funds. No ongoing obligations exist.

PSP Loans ($17 billion total): The 10-year repayment clock began when funding was received (roughly March 2020 for PSP1, December 2020 for PSP2, March 2021 for PSP3). Repayment maturity is therefore March 2030, December 2030, and March 2031, respectively.

• American Airlines: Has repaid ~60% of PSP loan obligations ahead of schedule using loyalty securitization proceeds ($10B AAdvantage securitization 2021). Expected to fully repay by 2027.
• Delta: Has repaid ~50% of PSP loan obligations ahead of schedule using SkyMiles securitization proceeds ($9B SkyMiles securitization 2020). Expected to fully repay by 2027-2028.
• United: Has repaid ~40% of PSP loan obligations using MileagePlus securitization proceeds ($6.8B in 2020). Expected to repay remaining obligations on schedule by 2030-2031.
• Southwest: Ahead of schedule, fully repaid PSP loan obligations by 2024.
• Smaller Carriers: Most are on track for repayment on schedule or ahead of schedule. Spirit Airlines may experience impairment to CARES Act loan repayment due to bankruptcy, though bankruptcy code typically allows governments to recover in the priority order.

National Carrier Loans ($3.5 billion drawn of $25 billion available):

• American Airlines drew ~$2.2 billion, now largely repaid or refinanced.
• Delta drew ~$1.6 billion, now largely repaid or refinanced.
• United drew ~$1.5 billion, most still outstanding with maturity around 2030.

Summary: As of February 2026, approximately $12-15 billion of the original $54 billion in CARES Act support remains outstanding (primarily PSP loans and National Carrier loans). The remainder has been repaid or is on track for repayment. All major carriers have exceeded expectations in repayment speed, driven by improved financial performance in 2021-2024 and refinancing through capital markets (EETCs, loyalty securitizations).

Comparative Analysis: U.S. CARES Act Versus International Airline Aid

The U.S. CARES Act was not unique. Other countries provided airline support:

European Union: EU member states provided roughly €30-35 billion in support (grants and loans) to European carriers. Air France received €7 billion in loans, Lufthansa received €9 billion in loans, and KLM received €3.4 billion. EU aid was typically structured as loans with equity warrants or direct equity stakes. Terms were generally harsher than U.S. CARES Act (higher interest rates, stricter collateral requirements).

Germany: Germany provided €9 billion to Lufthansa specifically, including €3 billion in equity. This gave the German government a 20%+ stake in Lufthansa.

France: France provided €7 billion to Air France-KLM, including equity stakes and loans. France also conditioned aid on environmental commitments (phase-out of short-haul regional flights, aircraft efficiency targets).

Canada: Canada provided roughly CAD $15 billion (USD ~$11 billion) in support to Air Canada and other carriers, structured similarly to U.S. CARES Act (grants plus loans).

Australia: Australia provided AUD $1.3 billion (~USD $900 million) to domestic carriers.

Comparison: The U.S. CARES Act was comparatively generous—high percentage of grants (70%), low interest rates (1% for 5 years), and minimal equity dilution (warrants rather than direct equity stakes). This reflected the U.S. policy preference for liquidity support over equity control and the political salience of "not nationalizing airlines."

Impact on Airline Financial Structure and Flexibility

The CARES Act had several longer-term impacts on airline capital structure and financial flexibility:

1. Preserved Employment: The PSP was explicitly designed to preserve airline payroll. By funding 6-9 months of labor costs, the government prevented massive layoffs. Estimates suggest PSP preserved 250,000+ airline jobs (pilots, flight attendants, mechanics, ground workers, administrative). This had downstream economic effects: reduced unemployment, preserved consumer spending, preserved tax revenue.

2. Maintained Service to Small Communities: CARES Act requirements included maintaining service to small and essential communities. This prevented the wholesale abandonment of regional routes that would have exacerbated regional economic disruption.

3. Delayed Bankruptcies: By providing liquidity, CARES Act prevented bankruptcies that would have occurred in 2020-2021. Without CARES Act support, American Airlines likely would have filed for bankruptcy in 2020 (as it was at the edge of insolvency in March 2020). United and Delta would have faced severe distress. The act essentially bought time for operations to normalize and capital markets to reopen.

4. Improved Creditor Recovery: By preventing bankruptcies, CARES Act improved creditor recovery relative to bankruptcy scenarios. Unsecured bondholders and suppliers that would have recovered 10-30% in bankruptcy instead recovered 100% on current obligations. This benefited not only large creditors but also suppliers and smaller vendors who would have faced massive losses in airline bankruptcy.

5. Enabled Loyalty Program Securitization: The liquidity from CARES Act support (PSP grants and loans) enabled carriers to stabilize operations through 2020 and reach 2021 with improved credit profile. This allowed the $26+ billion loyalty program securitizations (discussed in separate article) to execute successfully in 2020-2021, providing additional refinancing capacity.

Criticism and Moral Hazard Concerns

The CARES Act airline support was not without criticism:

1. Moral Hazard: Critics argued that providing rescue financing reduces incentives for prudent capital management. Airlines that had loaded up on debt in 2015-2019 (when capital was cheap) were bailed out, while carriers that had maintained lower leverage (Southwest) faced the same crisis. This may encourage excessive leverage by future executives who believe government will rescue them.

2. Executive Compensation: Although CARES Act prohibited raises in executive compensation, some carriers faced criticism for executive bonuses and equity grants that occurred pre-crisis (but were paid out post-crisis). Critics argued that executives whose decisions led to high leverage should have borne more of the burden.

3. Shareholder Protection: The CARES Act provided grant funding that preserved shareholder equity value. Some argued that equity holders should have been wiped out (as occurs in bankruptcy) before government provided aid. Others contended that passenger preference for flying on solvent carriers justified equity preservation.

4. Incomplete Warrant Valuation: The government received warrants as compensation for some of its support. However, warrant valuation was controversial. Some analysts argued the government warrants were underpriced and represented a gift to airlines. Others argued the warrants were overpriced and provided good value to taxpayers. As of February 2026, the warrant valuations are still evolving as carriers' stock prices fluctuate.

5. Effectiveness for Smaller Carriers: Critics noted that while major carriers received $5+ billion each, smaller carriers received much less. A regional carrier might receive $50-100 million, insufficient to cover even 2 months of payroll. Some smaller carriers argued the allocation formula (based on payroll size) disadvantaged carriers serving remote or small markets.

Lessons for Future Crises and Government Intervention

The CARES Act provides several lessons for future government intervention in aviation:

1. Speed Matters: The rapid deployment of CARES Act support (2 weeks from legislative proposal to funding) prevented operational collapse and maintained confidence. Future crises will likely require similar speed.

2. Liquidity vs. Solvency: CARES Act addressed a liquidity crisis (carriers had assets and revenue potential but needed immediate cash). Governments can address liquidity with loan programs. However, if the crisis were solvency (permanent loss of demand), grants would be insufficient, and equity recapitalization would be necessary. Future interventions should distinguish between the two.

3. Conditionality Matters: CARES Act included restrictions (no buybacks, no dividends, no compensation increases, service requirements). These were enforced and prevented abuse. However, some critics argued restrictions were too weak (e.g., warrant-setting methodology was unclear). Future programs might impose stricter conditions (debt limits, cost reduction targets, service guarantees).

4. Private Market Crowding: CARES Act support enabled carriers to avoid bankruptcy and preserve balance sheet value. This allowed loyalty securitizations and EETCs to execute successfully. Future support programs should consider whether they are enabling or crowding out private capital markets.

Conclusion: CARES Act as Model and Cautionary Tale

The CARES Act airline support was unprecedented in scale and generosity, reflecting the systemic importance of aviation to the U.S. economy. By providing $54 billion in support (roughly $37 billion in grants and $17 billion in loans), the government preserved airline operations, employment, and service. As of February 2026, carriers are repaying loans ahead of schedule and all major carriers remain operational.

Whether the CARES Act was the "right" policy remains debated. Supporters point to preserved employment and avoided bankruptcies. Critics point to moral hazard and inequitable distribution. Most likely, the truth is mixed: the policy was successful in achieving its immediate goal (preventing systemic collapse) but may have created incentives for future excessive leverage.

For airport finance professionals, the key lesson is that government airline support, while rare, is possible in systemic crises. Airports should monitor both airline financial conditions and government policy signals. A carrier with deteriorating finances that is "too important to fail" may benefit from government support that allows continued operations despite financial stress. Understanding this dynamic is important for long-term planning and bond investor analysis.