Airlines’ Debt Pile Hits $340 Billion as Covid Chokes Travel

Airlines are piling on more debt as surging coronavirus cases force travelers to cancel plans and stay home. 

The industry’s outstanding debt has jumped 23% since 2020 to $340 billion, according to data compiled by Bloomberg. So far this year, global air carriers have sold $63 billion in bonds and loans. 

It’s more evidence that the industry faces a bumpy road ahead, with many border restrictions still in place and the high-season of summer vacations in the U.S. and Europe coming to an end. EasyJet Plc and Japan Airlines Co. announced new fundraising plans this month to help them weather the prolonged pandemic.

Airlines’ Debt Pile Hits $340 Billion as Covid Chokes Travel

“The spread of the Delta variant may lead to other countries imposing tougher quarantine rules on visitors,” said Susannah Streeter, a senior investment and markets analyst at Hargreaves Lansdown. 

Many carriers are returning to the bond market after last year’s dash-for-cash when the pandemic first struck. The big sales show that investors are still ready and willing to give ample funding to the industry. 

Here are some recent examples of companies in the market:

  • EasyJet raised $400 million of new debt along with 1.2 billion pounds ($1.7 billion) in stock. The funding will provide a buffer to get through the slow winter season and position the carrier for a tentative rebound in leisure travel.
  • Japan Airlines secured almost 300 billion yen ($2.7 billion) in fresh funding via subordinated bonds and loans. The funds will also be used to upgrade its fleet by procuring Airbus SE’s A350-1000 aircraft as its flagship for international lines, JAL said.
  • Australia’s Qantas Airways has announced plans for a bond sale.

Europe

The European Union’s latest pandemic recovery bond sale is expected to spur a hectic week of sales from Europe’s safest borrowers.

  • Surveyed primary market participants are expecting the SSA sector to be particularly busy
  • There are more than 10 mandated deals in the pipeline
  • Swiss employment services firm Adecco International Financial Services B.V. and U..S. utility firm The Southern Co. are both planning hybrid issues
  • Lenders Caixa Geral de Depositos SA and Eurocaja Rural SCC are seeking sustainability bonds, while mBank SA and Norddeutsche Landesbank have mandated banks to arrange their green deals

Asia

The pipeline for Asian dollar bonds is looking strong as issuers jumped on a global rush to lock in funds before rates move higher. 

  • A unit of Nissan Motor Co. kicked off an offering of dollar bonds linked to an alternative to the London interbank offered rate, as the move away from the benchmark gains more traction in credit markets globally
  • Bangkok Bank PCL is planning a series of investor meetings for a new issue
  • Korea Electric Power Corp. has scheduled investor calls for a green deal
  • India’s JSW Steel Ltd. has picked a group of banks to lead its new bond and could be tied to sustainability targets

U.S.

The U.S. saw hefty sales following Labor Day holiday last week that chalked up $76 billion of issuance.

  • The pace of high-grade bond sales slowed after the onslaught
  • High-yield pipeline includes deals for Unifrax Corp. which is selling $1.2 billion of bonds to back its acquisition of Lydall Inc., and Solenis LLC is marketing $2.4 billion of bonds that will fund its buyout by Platinum Equity

©2021 Bloomberg L.P.

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