JetBlue has pledged slots at three airports in New York and the Washington, D.C. area as collateral for a $750 million loan. The airline entered into the agreement with lenders on June 17th in an effort to raise cash and boost liquidity. JetBlue will still be able to use the slots for its normal operations.
JetBlue pledges slots in exchange for financing
Like many airlines, JetBlue has been forced to seek funds by various means as the current crisis has caused a major cash crunch for carriers. While the US government did come in and help out airlines, the federal funding only goes to support the airline’s payroll leaving other expenses unaccounted for. Thus, JetBlue has now entered into a $750 million Term Loan Credit Agreement.
For collateral, JetBlue has pledged takeoff and landing slots at three airports. This includes New York’s LaGuardia Airport (LGA), John F. Kennedy International Airport (JFK), and Washington, D.C.’s Reagan National Airport (DCA). All of these airport slots are incredibly valuable. The airline did not disclose how many slots at each airport are being put up.
As part of the agreement, JetBlue will continue to use its pledged slots per FAA guidelines. This also takes into account any exemptions or waivers the carrier has received from the Department of Transportation.
Slots considered incredibly valuable
New York-JFK is one of the busiest airports in the world. With plenty of airlines vying for flights to and from the airport, slots there are incredibly valuable, although not as expensive as some others.
For JetBlue, JFK was the airline’s largest operating base. As the airline charts a path forward, JFK will continue to be important for the carrier as it seeks to brand itself as “New York’s Hometown Airline.”
LaGuardia and Reagan National are smaller airports. However, they are still incredibly important. Both are highly regarded for their close access to the major political and business locations of New York City and Washington, D.C., respectively. There are also limits as to the size of aircraft that can fly in and out of these airports due to runway length and perimeter rules that limit nonstop flights beyond a certain range.
Airport slots, in general, are worth a lot of money at certain airports. In 2016, Oman Air purchased a pair of slots at London-Heathrow for a whopping $75 million. American Airlines also made a similar purchase in 2015 for $60 million. Both of these purchases saw airlines selling slots amongst themselves. While these slots are not worth as much as Heathrow slots, the lenders could still get a fair bit of money from them if the airline defaults– something the carrier will go to great lengths to avoid.
Airlines still seeking outside financing
JetBlue is not alone in seeking financing. United Airlines recently used its MileagePlus program to secure a $5 billion loan. Meanwhile, American Airlines is planning on using revenues from its AAdvantage credit card as collateral for a federal government loan.
Slots are just some of the assets airlines can use as collateral- JetBlue could finance some of its owned aircraft or gates for a loan. In this case, it appears that the airline’s executives believe that the slots were the better alternative.
Are you surprised to see JetBlue pledge slots for a loan? Let us know in the comments!