Airlines promise planes and frequent flyer programs to get funding
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Global airlines are pledging their brands, loyalty programs and planes as collateral to secure more funds in debt markets as the coronavirus pandemic continues to hit the industry.
Alaska Air Group Inc. said last week that it plans to use its customer mileage plan as collateral to secure funding backed by the U.S. government. Other carriers that use their assets for fundraising include American Airlines Group Inc., which is borrowing against its trademark in a $ 1.2 billion deal with Goldman Sachs Group Inc., and Singapore Airlines Ltd, which has raised loans guaranteed by some of its Airbuses. and Boeing.
The coronavirus pandemic has forced carriers to be inventive as they bolster their coffers to cope with a lengthy recovery process for the travel industry. Airlines have already taken $ 49 billion in loan issuance, as well as $ 47 billion in bond sales, during 2020, a record year for the industry.
Secured loans have jumped to $ 21 billion so far this year, almost triple the figure for 2019. Secured bonds hit a record high of $ 13 billion, more than double the figure for 2019. show of the year 2019, according to data compiled by Bloomberg.
The deal for American Airlines includes a $ 1 billion issue secured by a first lien on certain intellectual property, including its brand “American Airlines” and the website domain name “aa.com”. The remaining $ 200 million will be secured by guarantees, including slots at domestic airports. The airline had previously issued bonds and loans to help it weather the pandemic.
United Airlines sold $ 6.8 billion in debt in June, backed by its frequent flyer program, setting a precedent for more to come. Alaska Air said in its earnings call last week that it plans to raise structured finance backed by its own loyalty program, worth at least $ 5 billion.
JetBlue Airways Corp. promised slots at major airports serving New York City, such as JFK and LaGuardia, as well as its JetBlue brand, when it marketed a loan deal in June.
European airlines, meanwhile, have turned to local governments for help. Air France-KLM has secured a € 2.4 billion ($ 2.82 billion) revolving facility that is guaranteed by the Dutch government, after previously securing a separate € 4 billion loan backed by France .
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