U.S. airlines continue to raise funds at a breakneck pace, with plans to tap Wall Street for close to $10 billion in new financing this week.
American Airlines will seek $3.5 billion through a share and convertible bond sale totaling $2 billion, and a $1.5 billion secured junk bond maturing in 2025. The Fort Worth-based carrier also plans to enter into a $500 million term loan facility due 2024.
American will use the proceeds to refinance debt coming due in 2021, as well as for general corporate purposes and to shore up its liquidity position. The carrier is also pursuing a $4.75 billion loan from the U.S. Treasury Department through the CARES Act, with final terms expected to be announced before the end of June.
United Airlines is in the market raising $5 billion of debt backed by its MileagePlus loyalty program, which the company values at $21.9 billion, or roughly 12X the program’s EBITDA last year. Chicago-based United also announced plans to raise an additional $3 billion by issuing senior notes due 2027 via the MileagePlus subsidiary.
Alaska Air Group, parent of Alaska Airlines and Horizon Air, will issue roughly $675 million of Class A pass-through certificates this week, which represent an interest in the assets of a trust that holds equipment notes secured by a mix of several dozen Boeing and Embraer planes.
The latest announcements appear set to bring the total amount of financing obtained by U.S. airlines this year above $100 billion, including roughly $42 billion in grants and loans provided through the CARES Act. Excluding the federal funds, carriers had raised $46.5 billion as of June 19, an analysis from Cowen & Co. indicated.
Airlines need all the funding they can get. American, Delta Air Lines and United are all burning through between $30-40 million per day in June, with flights operating well below breakeven load factors. Southwest Airlines is expecting a $20 million daily cash burn rate this month, while Alaska Airlines and JetBlue Airways are both burning through around $5 million per day.
Passenger throughput data tracked by the U.S. Transportation Security Administration (TSA) continues to climb from the lows seen in April but remains severely depressed compared to last year’s levels. On June 22, TSA screened over 607,000 people at security checkpoints across the country, topping the 600,000 mark for the first time since March 19, but down 78% from the 2.7 million screened on the same day last year.
Related Content
