American Airlines plans $5 billion bond sale backed by frequent flyer program to pay back other debt

American Airlines flight 718, the first U.S. Boeing 737 MAX commercial flight since regulators lifted a 20-month grounding in November, takes off from Miami, Florida, U.S. December 29, 2020.

Marco Bello | Reuters

American Airlines stated Monday it’s planning to self-discipline $5 billion in bonds and behold a $2.5 billion loan backed by its frequent flyer program, funds it intends to use to pay inspire about a of its debt feeble to support climate the coronavirus pandemic.

American and orderly competitors Delta Air Strains and United Airlines possess mortgaged their frequent flyer programs to support tackle a fall in revenue after the pandemic struck final year. In September, Delta raised a file $9 billion in debt backed by its SkyMiles loyalty program.

Airlines execute money from their frequent flyer programs by promoting miles to banks, which customers compose by the utilization of their credit ranking playing cards.

American’s sale includes $2.5 billion in five-year bonds and one more $2.5 billion in eight-year bonds. The proceeds shall be feeble to pay inspire federal loans that Congress passed final year to support the struggling airline commercial, other debt or fashioned purposes, the provider stated. American was as soon as granted about $5 billion beneath that program with the opportunity of upsizing it to $7.5 billion, but as of the tip of 2020, the airline had solely drawn on $550 million of that quantity. The loan has an pastime price of about 4%.

Castle Value, Texas-essentially essentially based fully American had whole debt of $41 billion at the tip of 2020 up almost 23% from the year earlier, before the pandemic hit.