Financial Affairs

American Airlines promises brand and slots to secure $ 1.2 billion loan

American Airlines has pledged its brand and hard-to-get take-off and landing rights in New York and Washington to secure a $ 1.2 billion loan as it tries to resist the sharp drop in travel due to the coronavirus pandemic.

The Fort Worth, Texas-based airline on Thursday announced that it had reached an agreement with the merchant banking division of Goldman Sachs for $ 1 billion in senior notes, secured by a first lien on the “American Airlines” brand. “And the domain name” “. in the United States and some foreign jurisdictions. Another $ 200 million in senior notes will be secured by a second lien on some slot machines at New York LaGuardia Airport and Washington Reagan National Airport.

American chief financial officer Derek Kerr said the company’s intellectual property was worth around $ 10 billion.

The airline, which was the most aggressive of the three largest US carriers to increase capacity after the demand-wracked pandemic, ended the second quarter with higher cash consumption than its rivals.

Americans consumed an average of $ 55 million per day for the quarter, rising from a high of $ 100 million per day to $ 30 million in June. Again, Delta Airlines reduced its average daily cash consumption to $ 43 million, while that of United Airlines refused at $ 40 million one day over the same period.

American added more flights in May and June as demand for air travel improved from its April nadir and investors upped the title. Yet the increase in Covid-19 cases in the southern and western states of the United States has stalled the rebound in travel, which was only a fraction of passenger numbers in 2019.

Doug Parker, managing director, said he was satisfied with the results of the airline’s strategy of flying more than its competitors. “Our revenues in June were six times higher than in April, and that would not have been the case if we had only used 20% of our capacity,” he said.

The company recorded a net loss of $ 2.1 billion on operating revenue which fell 86% to $ 1.6 billion. American now expects third quarter capacity “to be down about 60 percent year over year.”

“The current environment is more unpredictable and more volatile than anything we could have imagined,” wrote Mr. Parker and President Robert Isom in a note to staff. “But we know that adversity creates opportunities, and we remain convinced that we will emerge from this crisis in a strong competitive position.”

The reduced schedule for the third quarter is “encouraging,” Cowen analyst Helane Becker said in a note, “but we continue to think there is too much capacity in the market.”

The pandemic has caused a worldwide collapse in demand for air travel, with governments imposing stay-at-home orders and border restrictions, and passengers fearing contagion. Now airlines are touting their cleaning policies and, in some cases, their cleaning policies. middle seat blocking, to attract passengers to the heavens.

American has warned 25,000 employees they could be made redundant after September 30, an increase from the initial forecast of a A “surplus” workforce of 20,000 people.

Like other US carriers, the Americans accepted financial assistance from the US federal government in March. He qualified for $ 5.8 billion in grants and low-interest loans to pay for labor costs, with the caveat that he could not lay off workers before the ‘autumn. It also plans to accept an additional $ 4.75 billion in loans.

American ended the quarter with $ 10.2 billion in cash on hand. He raised $ 3.6 billion during the quarter by selling a combination of stocks, bonds and convertible bonds, as part of a sprint between US airlines to strengthen their balance sheets. He also refinanced a deferred drawing loan that will mature next year, meaning no debt maturities will loom until June 2022.

Southwest Airlines also released results on Thursday. It posted a second quarter net loss of $ 915 million, as operating revenue fell 83% to $ 1 billion.

Gary Kelly, chief executive, has become the second airline boss to say air travel “will remain depressed” until a vaccine or effective treatment for Covid-19 becomes available.

United chief executive Scott Kirby said on Wednesday revenues would peak at 50% of pre-pandemic levels until the disease can be prevented.

Additional reporting by Sarah Provan in London