WASHINGTON — Top Democratic lawmakers have urged Treasury Secretary Steven Mnuchin to quickly provide American airlines with direct payroll assistance and to avoid insisting on overly restrictive terms that could deter companies from taking the money.
Major airlines began submitting their applications for government support to the Treasury Department on Friday but there is growing concern within the industry that Mr. Mnuchin will demand strict terms to ensure that taxpayers are compensated, such as large equity stakes in the companies. Some of the airlines, which have seen demand plummet as the coronavirus pandemic has stalled global travel, are wary of giving the government too much control over their businesses and accepting strict conditions tied to the aid.
Democrats fear that if Mr. Mnuchin drives too hard of a bargain, airlines will balk and lay off more workers. In a letter that was sent to Mr. Mnuchin on Sunday, Senator Chuck Schumer of New York, the Democratic leader, and Speaker Nancy Pelosi warned that it would not be in the public interest if the airlines chose to declare bankruptcy.
“Assistance must not come with unreasonable conditions that would force an employer to choose bankruptcy instead of providing payroll grants to its workers,” they wrote in the letter, which was reviewed by The New York Times on Sunday.
The lawmakers said that they recognized the Treasury Department’s need to protect taxpayer money being used to bail out industries and to seek warrants — options to buy stock in a company — in exchange for government assistance. But they said that the administration must ensure that the companies commit to protecting workers, which was the intent of the law signed by President Trump. The letter was co-signed by Senator Sherrod Brown of Ohio, the top Democrat on the banking committee, and Representative Peter A. DeFazio of Oregon, the Democratic chairman of the House Transportation and Infrastructure Committee.
“We urge you to quickly and fairly enter into direct payroll assistance agreements with each of the carriers and contractors provided for in the law,” they said.
The $2 trillion economic stabilization package that Congress passed last month earmarked $25 billion in grants and another $25 billion in loans for the industry. Cargo carriers were also allocated $8 billion of grants and loans. Airlines are expected to maintain their staffing levels through the end of September if they accept the money.
Last week, the Treasury Department laid out the application process for airlines and asked them to propose how they would compensate the government for aid. Mr. Mnuchin is working with investment banks to help negotiate the terms and said last Thursday that he had selected PJT Partners to work with the airlines and Moelis & Company to focus on cargo carriers.
The department has been under pressure to ensure that taxpayer money is protected and that the government does not just hand a blank check to companies, especially those that have spent several years using their cash to engage in stock buybacks, which reward shareholders. Major airlines spent $19 billion repurchasing their own shares over the last three years.
Mr. Mnuchin has insisted that companies will not be forced to hand over their stock, but that taxpayers must be compensated for offering relief.
“There is a specific line in the bill that says that the secretary, meaning me, will determine proper compensation,” Mr. Mnuchin said at a White House briefing last week. “Once we get our advice from our financial advisers, we get the applications from the airlines, I’ll be working very closely with the president, and we’ll make sure that we strike the right balance.”
The department had no immediate comment on the letter from lawmakers.
Airline executives have been hesitant to say whether they will let the government take stakes in their companies. Unions that represent flight attendants at several major airlines urged Mr. Mnuchin not to exercise his power to take stock in the airlines last week. They said it would deter executives from taking aid, leading to more job cuts.
“The public gets a huge return on investment in this deal,” said Sara Nelson, the president of the Association of Flight Attendants union. “It keeps two million hourly workers employed, paying taxes and able to spend, and it ensures that aviation is ready to fly again and restart our economy the moment we have the virus under control.”