Airlines' debt pile hits US$340 billion as Covid chokes travel

[LONDON] Airlines are piling on more debt as surging coronavirus cases force travellers to cancel plans and stay home.

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

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

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 US$400 million of new debt along with £1.2 billion (S$2.23 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 (S$3.62 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.

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

BLOOMBERG