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Vedder Thinking | News Ronald Scheinberg Discusses Federal Relief for the Aviation Industry in Law360

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Global Transportation Finance Shareholder Ronald Scheinberg was recently quoted in Law360’s article, “Airlines Wary Of Giving Up Equity For Gov't COVID-19 Funds,” where he discussed the Coronavirus Aid, Relief and Economic Security (CARES) Act and how U.S. airlines are approaching the federal relief.

In the article, experts in the aviation industry share their perspectives on the $25 billion of federal relief provided to U.S. airlines and the reluctance by many to relinquish equity in order to receive the aid. Aviation professionals including Mr. Scheinberg note one of the primary reasons airlines are hesitant to accept the relief despite drastic economic conditions is the fact that the U.S. Government is seeking equity upside in the airlines as consideration for the aid.. “Compensation for the government will likely take the form of fees and equity,” he said.

To avoid a loss of equity, Mr. Scheinberg believes airlines may seek financial assistance elsewhere, stating that “a number of the U.S. airlines are very strong enterprises and may very well have opportunities for funds from the private sector.” Despite the fact that most U.S. airlines have already applied for federal aid under the CARES Act in the form of payroll relief, Mr. Scheinberg believes that many will not opt for loan guarantees in order to preserve stock value, concluding “giving up sizable equity to the government would, of course, dilute the holdings of existing shareholders.”

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Ronald Scheinberg