Delta Air Lines Pursuing Secured Loan Backed by SkyMiles
Airlines have burned through substantial amounts of cash in 2020, as the COVID-19 pandemic has crushed air travel demand. With demand unlikely to improve very much in the near term, most airlines are shoring up their liquidity, believing that there's no such thing as having too much cash on hand.
Delta Air Lines (NYSE: DAL) appears to be taking this approach. The company plans to market new loans and bonds secured by its SkyMiles loyalty program next month, according to Bloomberg, bolstering what is already a substantial cash hoard. Here's what makes this decision significant.
In early July, United Airlines (NASDAQ: UAL) raised $6.8 billion backed by its MileagePlus loyalty program. United had previously tried to raise capital with more conventional aircraft-backed debt, but the only unencumbered planes it had left were quite old and unattractive to potential lenders. Offering the loyalty program instead allowed it to bring in a ton of cash at reasonable interest rates (6.5% for the secured debt portion of the financing).
Source Fool.com
