US airlines have taken on a lot of debt. From loans from the government to private market financing, airlines are taking on debt to have the cash to survive. As the year progresses, airlines are also seeking other ways to gain additional funding, usually through taking on debt. Airlines are still expecting to close on further government loans and take advantage of additional means of financing in the private market to bolster their liquidity.
Simple Flying analyzed the second quarter reports of mainline US airlines to see how much long-term debt they had at the end of June. Note that, with the upcoming end of the third quarter, numbers at many airlines are expected to grow.
Alaska Airlines, based in Seattle, stated it had $1.549 billion of long-term debt. Of this, $446 million were for fixed-rate notes payable due through 2029, while another $276 million is for fixed-rate Payroll Support Program (PSP) notes payable due through 2030. As for variable-rate notes, Alaska owes $1.925 billion there payable due through 2029. Less the current portion of debt due, that brings the airline down to $1.549 billion in long-term debt, compared to $1.264 billion at the end of 2019.
The $276 million PSP note is a 10-year term with an interest rate of 1% in years one through five and a Secured Overnight Financing Rate (SOFR) plus 2% interest rate for years six through 10, with the loan being prepayable at any time.
Some new debt secured by June 30th included $589 million raised from securing 32 of its aircraft. At the same time, the airline made scheduled debt payments worth $125 million. For the remainder of 2020, as of June 30th, Alaska Airlines owed $529 million.
Shortly after the end of the second quarter, Alaska Airlines also obtained an additional $1.2 billion in private funding through the issuance of Enhanced Equipment Trust Certificates (EETCs). The collateral for those certificates consists of 42 Boeing 737 planes and 19 Embraer E175 aircraft.
Low-cost carrier Allegiant Air stated, at the end of the second quarter 2020, that it had $1.2 billion in long-term debt. This was comprised of $273 million in fixed-rate debt and finance lease obligations due through 2029. The bulk of the long-term debt comes from variable-rate debt due through 2029, which makes up $1.228 billion. Less the current maturities and related costs of $227 million, Allegiant Air has a grand total of $1,273,439,000 in long-term debt – or about $1.273 billion, compared to $1.248 billion at the end of 2019.
In April 2020, Allegiant entered into a payroll support loan agreement with the United States Department of Treasury. That is scheduled to mature ten years after issuance with an interest rate and prepayable applicability matching that of Alaska Airlines’.
As of June 30th, through 2020, Allegiant had maturities of $108.8 million this year. In April 2020, the airline borrowed $31 million secured by two aircraft with interest at a fixed rate, payable in quarterly installments over eight years.
American Airlines entered the crisis with plenty of debt, mostly used to finance new aircraft. The airline’s total long-term debt stood, as of June 30th, at nearly $28.2 billion. Broken down, the vast majority of the airline’s debt is secured:
- $1.788 billion from a 2013 Term Loan Facility with installments due through 2025
- $750 million from a 2013 Revolving Facility due 2024
- $1.220 billion from a 2014 Term Loan Facility with installments through 2027
- $1.643 billion from a 2014 Revolving Facility due in 2024
- $960 million from an April 2016 Term Loan Facility with installments through 2023
- $450 million in an April 2016 Revolving Facility due 2024
- $1.213 billion from a December 2016 Term Loan Facility with installments through 2023
- $2.5 billion from 11.75% senior secured notes, interest-only payments until due in July 2025
- $11.410 billion from EETCs maturing from 2020 to 2032
- $4.610 billion from EETCs maturing from 2020 to 2032
- $1.064 billion from special facility revenue bonds maturing from 2021 to 2036
Secured debt totals $27.608 billion with collateral, including aircraft, engines, simulators, spare parts for jets, gate leasehold rights at airports, route authorities, slots, and pre-delivery payments. As for unsecured debt, $1.540 billion comes from PSP promissory notes, another $1 billion from 6.50% senior notes with interest-only payments until due in July 2025, $750 million from 5% senior notes with interest-only payments until due in March 2025. This brings long-term unsecured debt to $3.790 billion.
In total, long-term debt at American stood at $31.398 billion as of June 30th. Less current maturities and other discounts, this brings American’s overall long-term debt to $28.193 billion. This compares to $20.896 billion in long-term debt at the end of 2019.
Upcoming this year is also the closing of a government loan backed by certain revenues from American’s AAdvantage program.
Delta Air Lines
Atlanta-based Delta Air Lines is sitting at $18.5 billion in long-term debt, as of June 30th. This includes $5.8 billion in unsecured notes, $1.438 billion from the PSP program loan, $3.5 billion in senior secured notes maturing in 2025, $1.5 billion in a 2020 term loan maturing between 2020 and 2023, $2.65 billion in a 2018 Revolving Credit Facility maturing between 2021 and 2023. Another $2.950 billion comes from a 2020 Secured Term Loan facility maturing in 2021.
As for financing arrangements secured by aircraft, Delta has $2.731 billion in certificates maturing between 2021 and 2028. Another $1.146 billion in the form of notes maturing between 2020 and 2025. Both of these are due in installments.
Then comes $1.383 billion in the NYTDC Special Facilities Revenue Bonds, Series 2018. NYTDC stands for the New York Transportation Development Corporation. Delta entered into loan agreements with the NYTDC back in 2018 to fund construction costs of the airline’s new LaGuardia Airport.
Another $214 million comes in the form of other financing and $270 million from another revolving credit facility, bringing total secured and unsecured debt to $25.582 billion – less current maturities of nearly $5 billion– that brings the number down to $18.539 billion.
Hawaiian Airlines has long-term debt of $868 million. Of this, $27.9 million is remaining due in 2020 as of June 30th. In 2021, the airline expects maturities of $82.853 million. The largest maturity is expected in 2022 when the carrier has $325.127 million in expected maturities.
In March 2020, the airline drew down $235 million in revolving loans secured by certain assets of the airline with requirements that the carrier maintains $300 million in liquidity. Then, in April, Hawaiian entered into an agreement with the Treasury Department for a $57.8 million PSP loan.
JetBlue has $3.711 billion in long-term debt as of June 30th. The airline has special facility bonds due through 2036 worth $42 million, enhanced equipment notes due through 2032 totaling $574 million, and another set of enhanced equipment notes due through 2028 worth $179 million. This compares to $2.245 billion in long-term debt from the end of 2019.
In terms of non-public debt, JetBlue has $125 million in fixed-rate enhanced equipment notes due through 2023, floating-rate equipment notes due through 2028 totaling $176 million, fixed-rate equipment notes due through 2028 totaling $984 million, a term loan credit facility due through 2024 totaling $717 million, the PSP loan due through 2025 at $251 million, sale-leaseback transactions in 2020 due through 2024 of $117 million, and a line of credit with Citibank due through 2023 at $546 million.
As part of that, this includes a $750 million loan that JetBlue received, pledging slots at three airports in exchange for the funding.
Southwest Airlines has just over $9 billion in long-term debt:
- $500 million in notes due 2020
- $300 million in notes due 2022
- $168 million in Pass Through Certificates due 2022
- $1.250 billion in notes due 2023
- $1.909 billion in convertible notes due 2025
- $1.250 billion in notes due 2025
- $300 million in notes due 2026
- $169 million in a Term Loan Agreement payable through 2026
- $300 million in notes due 2027
- $1.3 billion in notes due 2027
- $121 million in debentures due 2027
- $196 million from a Term Loan Agreement payable through 2028
- $500 million in Notes due 2030
- $850 million in a PSP loan due 2030
This second quarter total of $9.115 billion compares to $1.846 billion in long-term debt the airline had at the end of 2019.
Low-cost carrier Spirit Airlines is sitting on over $2.6 billion in long-term debt. This is broken down in the following:
- $279.4 million in fixed-rate senior term loans
- $992.2 million in fixed-rate term loans
- $60.4 million in unsecured term loans
- $333.5 million in 2015-1 EETC Class A
- $68 million in 2015-1 EETC Class B
- $92.4 million in 2015-1 EETC Class C
- $221.4 million in 2017-1 EETC Class AA
- $73.8 million in 2017-1 EETC Class A
- $65.6 million in 2017-EETC Class B
- $85.5 million in 2017-1 EETC Class C
- $101.4 million in convertible debt
- $291.2 million in revolving credit facilities
All in all, this totals $2.664 billion in debt, less of current maturities, comes out to $2.332 billion in long-term debt, compared to $1.959 billion at the end of 2019.
Of this, from the Treasury, the airline received $301.3 million as part of the PSP loan. An additional $33.4 million received from the Treasury in the third quarter is not included in the above list.
Plus, recently, the airline announced a new $850 million fundraising plan leveraging its frequent flier program while turning down a government loan.
United Airlines recorded $18.772 billion in debt at the end of June 2020. This compares to $14.552 billion of long-term debt at the end of December. This includes $1.2 billion in EETCs issued in September 2019.
During the second quarter, United also entered into an agreement with the US Treasury Department for a loan of $1.5 billion under the PSP.
Notably, United’s debt does not include MileagePlus financing, which occurred in July. In that issuing of notes, United raised $3.8 billion in 6.50% senior secured notes due 2027.
So, where do things shake out?
From most to least, here’s where US airlines stand in terms of long-term debt at the end of the second quarter.
- American Airlines: $28.193 billion
- United Airlines: $18.772 billion
- Delta Air Lines: $18.539 billion
- Southwest Airlines: $9.115 billion
- JetBlue: $3.711 billion
- Spirit Airlines $2.332 billion
- Alaska Airlines: $1.549 billion
- Allegiant Air: $1.273 billion
- Hawaiian Airlines: $868 million
All in all, the four largest US airlines hold the most debt. Those carriers were hit by the global crisis hard with the cessation of most long-haul international flying and the mandate to provide refunds to customers for canceled flights.
Airlines have turned to debt as a means to stabilize the ship and ensure viability through the future. With the third quarter coming to an end soon, expect these numbers to grow at most airlines.
Are you surprised at any of these values? Let us know in the comments!