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Airlines get $60 billion coronavirus bailout, with strings attached

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  • A bipartisan coronavirus aid package in the Senate offers $58 billion to the nation’s airlines, split evenly between loans and payroll grants.
  • The coronavirus bailout package, which aligns with requests made by US airlines, would prohibit stock buybacks and share dividends for at least a year after the loans have been repaid. It also restricts executive compensation.
  • Airlines would be prohibited from laying off or furloughing employees through September, should the crisis for air carriers continue past then, effectively protecting “hundreds of thousands of jobs,” one union official said.
  • Visit Business Insider’s homepage for more stories.

Airlines will receive nearly $60 billion in financial assistance as part of the Senate’s rescue package, meeting their request as the industry falls into a tailspin due to the coronavirus pandemic.

The bill grants $25 billion in loans and loan guarantees for passenger airlines, and an additional $4 billion for cargo air carriers.

Additionally, the bill gives airlines $25 billion in grants to pay workers through September. Cargo air carriers get an additional $4 billion.

A separate $17 billion in loans is specified for companies “critical to maintaining national security.” Boeing is reported to be the intended recipient for a large portion of the amount.

The loans are conditional on job protection — airlines accepting aid will not be allowed to lay off or furlough workers until September 30, at which point the crisis could be over or winding down for air carriers.

Airlines receiving aid will also be prohibited from buying back shares of their own stock for a year after the loan is fully paid off and bars them from issuing dividends to shareholders while receiving aid. This provision can be waived by the Treasury Secretary if deemed “necessary to protect the interests of the Federal Government,” though the secretary would be required to testify before the House and Senate in such a case.

Executive compensation for any airline receiving aid is capped at 2019 levels. CEOs of the major US airlines earned between $10 million and $15 million in total compensation in 2018. Figures for 2019 are not yet publicly available.

Under the terms of the loan portion of the bill, the government would take an equity interest in the companies until the loan is paid back — something that Boeing CEO David Calhoun has previously said the company would not want to accept.

How airline industry stakeholders are responding

US passenger and cargo airlines, through the lobbying organization Airlines for America, had jointly asked for $58 billion in aid: $29 billion in payroll grants, and $29 billion in loans.

Airline employee unions have argued that providing aid to the airlines in the form of payroll grants is the fastest way to provide assistance to workers, since there is already a disbursement mechanism in place.

The Association of Flight Attendants (AFA), which represents cabin crew at about 20 mainline and regional airlines, said it was pleased with the deal, and that it would help employees worried about layoffs.

“This is an unprecedented win for frontline aviation workers and a template all workers can build from,” AFA president Sara Nelson said in a statement. “The payroll grants we won in this bill will save hundreds of thousands of jobs and will keep working people connected to healthcare many will need during this pandemic.”

“This is not a corporate bailout; it’s a rescue package for workers—for Flight Attendants, gate agents, pilots, mechanics, caterers, airport maintenance and janitorial staff and everyone who keeps our aviation system moving,” she added.

The Air Line Pilots Association (ALPA), the largest pilots union, reacted similarly.

“From the outset, ALPA maintained that any economic relief bill must put workers first to keep airplanes flying and help move our economy,” Captain Joe DePete, ALPA president, said in a statement.

“ALPA pilots applaud the fact that the economic relief package contains provisions to limit furloughs, protect our contracts, and ensure that federal assistance is used to pay airline employees’ salaries and benefits, not executive compensation or corporate stock buybacks,” he added.

Another $3 billion in payroll grants would be provided to airline contractors that have faced pressure as travel has plummeted. However, it was not immediately clear if airline contractors who were laid off last week would be included in the new protections.

“One passed, the layoff protection for contracted airport workers could be the difference between families going hungry and facing homelessness or holding on safely to survive along with the industry they serve,” Kyle Bragg, president of 32BJ SEIU, which represents airline contract workers in the New York area, said in a statement. “We implore Congress to pass the bill to protect 125,000 contracted airport workers and ensure that our airports can continue to operate after this crisis is over.”

Airlines have seen revenue evaporate since the beginning of the pandemic, as travel demand has plummeted to near zero. Travel bans and border closures, coupled with directives to self-isolate or quarantine have forced airlines to suspend routes, ground planes, and cut costs wherever possible.

Airlines in the US have so far avoided layoffs and furloughs, and offered unpaid leave options to employees. On Saturday, airline CEOs, through a letter from Airlines for America, warned that without payroll grants, staff reductions would be inevitable.

In the letter, the airlines said with payroll grants, they would be able to avoid layoffs until at least August 31, 2020, should the crisis continue through summer. The Senate bill requires an additional month before any job reductions.

United Airlines individually warned employees on Friday that it would begin staff reductions if an aid package was not settled by the end of March.

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Goldman Sachs names new leaders to handle equity investments

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  • Goldman Sachs has named Bradley Gross, Stephanie Hui, Adrian Jones and Scott Lebovitz to lead a newly formed decision-making body responsible for overseeing the firm’s investments in private equity.
  • They replace Sumit Rajpal and Andrew Wolff, two execs who left in February after losing a power struggle with Julian Salisbury for control of the entire merchant banking division. 
  • In addition to private equity, Goldman also has teams doing private credit, infrastructure, real estate, and public equity investing.
  • Click here for more BI Prime stories.

Goldman Sachs has tapped four executives for a new leadership body that will oversee private-equity stakes taken on behalf of itself and clients, in effect naming the leaders of the private-equity part of its newly reconfigured alternative investing unit. 

Bradley Gross, Stephanie Hui, Adrian Jones, and Scott Lebovitz will make up a newly formed global equity leadership group, according to memo to employees sent on Thursday and signed by merchant banking chief Julian Salisbury. The new group will meet weekly to oversee overall investment processes, new investment sourcing activities and leadership development for other employees in the division. 

The merchant banking division also has teams doing private credit, infrastructure, real estate and public equity investing.

CEO David Solomon last year announced plans to merge five investing teams into a single alternative investing unit and pivot from a strategy of investing its own money to one investing on behalf of pensions and sovereign wealth funds.

The early months of the strategy was beset by doubts and internal rivalries, leading to the February exit of Sumit Rajpal and Andrew Wolff, who shared oversight of the division with Salisbury and were co-heads of the corporate equity business.  

The four execs named today effectively replace those two in running corporate equity.

They have already been serving on the MBD Corporate Equity Investment Committee, which is chaired by Rich Friedman and makes final decisions on what equity investments should be made and which should be skipped. 

Hui is also co-head of the growth equity business globally and co-head of the merchant banking division in Asia. Lebovitz helps run Goldman’s infrastructure investment activities. 

Here’s the full text of the memo:

We are pleased to announce the formation of the Global Equity Leadership Group for the Merchant Banking Division.  Focusing on our significant opportunities in corporate private equity, this leadership group will be responsible for driving our investment processes, enhancing our sourcing and value creation capabilities, and developing our investment teams around the world.

This new group will comprise of Bradley Gross, Stephanie Hui, Adrian Jones and Scott Lebovitz. They will add this important operational responsibility to their roles on various MBD investment committees, including the MBD Corporate Equity Investment Committee, which continues to oversee all investment decisions in corporate private equity, chaired by Rich Friedman.

  • Within the Global Equity Leadership Group, Brad will now lead our corporate private equity investment activities in the Americas and EMEA, extending his existing leadership roles in driving our Digital Edge transformation program and broader value enhancement initiatives across our portfolios.  He will continue to serve on the MBD Corporate Equity Investment Committee and MBD Growth Equity Investment Committee.
  • Stephanie will lead our corporate private equity investment activities in Asia, and will continue to serve as global co-head of our Growth Equity Business, and co-head of MBD in the region.  She will continue to serve on the MBD Corporate Equity Investment Committee and the MBD Growth Equity Investment Committee.
  • Adrian will extend his investment responsibilities as a member of the MBD Corporate Equity Investment Committee, by now joining the MBD Infrastructure Investment Committee and MBD Growth Equity Investment Committee.  He will also serve as chairman of the global equity business, with a special focus on driving deal sourcing across Goldman Sachs, fundraising, board leadership, mentoring deal teams, sustainability initiatives and identifying and leveraging synergies across our global equity portfolio.
  • Scott will continue to serve as global co-head of our MBD infrastructure investment programs, and as global head of our energy practice, in addition to his new operational responsibilities in corporate private equity.  He will continue to serve on the MBD Corporate Equity Investment Committee and the MBD Infrastructure Investment Committee.

The new Global Equity Leadership Group will meet weekly, and will work with all of you to help enhance our decision-making and continually improve our investment processes.  We are excited about this new leadership opportunity for Brad, Stephanie, Adrian and Scott, and wish them the very best as they work with all of you in delivering superior investment performance for our investors.

Julian Salisbury



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Saudi Arabia plowed $1 billion into Shell and other European oil producers

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Saudi Press Agency via AP

  • Saudi Arabia snapped up about $1 billion worth of stock in four European oil companies, The Wall Street Journal reported on Wednesday.
  • The kingdom took advantage of the coronavirus sell-off and slump in oil prices to build stakes in Royal Dutch Shell, Equinor, Total, and Eni, the newspaper said.
  • Saudi’s Public Investment Fund, which recently took an 8.2% stake in cruise giant Carnival, made the purchases.
  • Shares in Shell, Equinor, Total, and Eni have all tumbled more than 30% since January.
  • Visit Business Insider’s homepage for more stories.

Saudi Arabia bought about $1 billion worth of shares in four European oil producers in recent weeks, The Wall Street Journal reported on Wednesday.

The world’s largest oil exporter capitalized on the coronavirus-fueled market meltdown and the crash in oil prices to build stakes in Royal Dutch Shell, Equinor, Total, and Eni, The Journal said, citing people familiar with the matter.

Saudi’s $300 billion Public Investment Fund made the purchases, somewhat undermining its objective to diversify the kingdom’s economy away from oil. Its managers may be eager to tap into foreign income streams at bargain prices, especially as lower oil revenues and stimulus plans are set to widen the national budget deficit this year. The fund recently took an 8.2% stake in Carnival after coronavirus sunk the cruise giant’s stock.

The novel coronavirus pandemic has disrupted global trade, forced factories to cut back or close, and led to widespread lockdowns intended to slow its spread, slashing demand for fuel. Saudi and Russia are also locked in an oil-price war after failing to agree on output cuts, meaning there’s a supply glut.

Shares in Anglo-Dutch behemoth Shell, Norwegian oil giant Equinor, French producer Total, and Italian rival Eni have all slumped more than 30% since January. Equinor’s stock was flat in early trading on Thursday, while the other three climbed about 1%.

Shell, Equinor, and Eni declined to comment to The Journal. Meanwhile, the Saudi Public Investment Fund and Total didn’t respond to a request for a comment from the newspaper.

Business Insider has reached out to all the involved parties but a comment was not immediately available.





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Chicago super-spreader shows the importance of social distancing

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  • A case study in Chicago demonstrated the importance of social distancing in containing the spread of the coronavirus.
  • The investigation, which was published Wednesday by the US Centers for Disease Control and Prevention and Chicago Department of Health, traced the cases from the first infected individual, identified as Patient A1.1, after they attended a funeral and birthday party.
  • The coronavirus, which causes a respiratory illness known as COVID-19, spread to at least 16 other people and killed three in the super-spreading event.
  • Visit Business Insider’s homepage for more stories.

A super-spreading event in Chicago, Illinois, is emphasizing the importance of social distancing in containing the spread of the coronavirus, experts say.

A case study published Wednesday by the Centers for Disease Control and Prevention and the Chicago Department of Health illustrated the chain reaction of the coronavirus spread by investigating the super-spreader, identified as Patient A1.1.

The investigation, which spans 28 days, traced the subsequent cases from Patient A1.1, who had recently traveled out-of-state, as the virus spread to at least 16 other people and three died after attending a funeral and birthday party. The ages of those who contracted the virus ranged from 5 to 86, and the three deceased were all older than 60, according to the CDC report.

In February, Patient A1.1, who was experiencing mild symptoms at the time, went to a potluck dinner with two other people the evening before the aforementioned funeral, the deceased being a close family friend who died from non-coronavirus-related circumstances. The meal, which lasted three hours, also involved common serving dishes.

The next day, Patient A1.1 attended the funeral, offering condolences and hugging friends and family. Within a week of the event, both hosts of the dinner and one funeral attendee tested positive for the coronavirus, which causes a respiratory illness known as COVID-19.

The condition of one dinner host deteriorated enough to warrant hospitalization, when a family member visited without wearing any personal protective equipment. The family member later began to develop coronavirus symptoms, and the dinner host eventually died.

coronavirus driving roads chicago



Rebecca Harrington/Business Insider


Patient A1.1 infected at least seven people at a birthday party, two of whom died of the coronavirus

Meanwhile, Patient A1.1, who was still experiencing symptoms, attended a birthday party with nine people, which lasted about three hours. Seven attendees later were diagnosed with COVID-19.

One attendee who tested positive was eventually hospitalized and spread the virus to two other people who visited them in the hospital — and one visitor, in turn, infected another likely due to household contact. The party attendee later died of COVID-19.

Three symptomatic party attendees attended a 90-minute church service, infecting at least one person seated one pew in front of them. The incident of the infected church-goer came as Illinois banned gatherings of 50 or more people, more than two weeks since Patient A1.1 had infected the two dinner hosts.

Four days after the gatherings ban, Illinois Gov. J.B. Pritzker issued a state-wide stay-at-home order.

“Media reports suggest the chain of transmission described in Chicago is not unique within the United States,” the report stated. “Together with evidence emerging from around the world, these data shed light on transmission beyond household contacts, including the potential for super-spreading events.”

“Overall, these findings highlight the importance of adhering to current social distancing recommendations, including guidance to avoid any gatherings with persons from multiple households and following state or local stay-at-home orders.”

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