Airline-wide capital binge triggered by the pandemic

US airlines increased the size of debt and equity fundraisings this week to nearly $10 billion after receiving a warm reception from investors, continuing an industry-wide capital binge triggered by the pandemic. American Airlines was seeking yesterday to raise a $1.5 billion bond and $500 million loan, to add to a $2 billion fundraising on Tuesday split roughly evenly between shares and convertible notes. The $4 billion goal is $500 million more than originally sought. The new bonds will be backed by American’s routes, slots and gates at airports across the globe. It follows Alaska Airlines on Tuesday, which raised close to $1 billion of debt, up from a proposed $674 million, backed by 61 aircraft, representing 28 per cent of the airline’s fleet. Meanwhile, United Airlines is looking to raise $3 billion in bonds and $2 billion in loans by the end of the week… The flurry of deals comes as airlines seek to staunch daily cash outflows in the tens of millions of dollars, as they continue to operate emaciated schedules. US demand for air travel has improved since the spring but remains historically low. Capital markets have been buoyed by support from the Federal Reserve, helping boost investor confidence and open up the floodgates for companies looking to raise cash to see them through the pandemic. 

Claire Bushey and Joe Rennison