American Airlines Flight 718, the first commercial Boeing 737 MAX flight in the United States since regulators withdrew for 20 months in November, takes off from Miami, Florida, USA on December 29, 2020.
Marco Bello | Reuters
American Airlines said Monday it plans to issue $ 5 billion in bonds and seek a $ 2.5 billion loan with support from its frequent flyer program, funds it intends to use to repay part of its debt used to help overcome the coronavirus pandemic.
U.S. and major rivals Delta Air Lines and United Airlines have mortgaged their frequent flyer programs to help cope with a drop in revenue after last year’s pandemic. In September, Delta raised a record $ 9 billion in debt backed by its SkyMiles loyalty program.
Airlines make money with their frequent travel programs by selling miles to banks, which customers earn with their credit cards.
U.S. sales include $ 2.5 billion in five-year bonds and another $ 2.5 billion in eight-year bonds. The proceeds will be used to pay for federal loans approved by Congress last year to help the troubled airline industry, other debts or general purposes, the company said. American was awarded about $ 5 billion under this program with the possibility of raising it to $ 7.5 billion, but by the end of 2020 the airline had only earned $ 550 million of that amount. . The loan has an interest rate of approximately 4%.
The Texas-based Fort Worth American had a total debt of $ 41 billion by the end of 2020, 23% more than the previous year, before the pandemic hit.