Air Travel Drops but Airlines Keep the Monies Coming

Rising travel bubbles and the promise of a successful COVID-19 vaccine are helping airlines raise money through bonds, equity and other financing models
Airlines have issued bonds worth $88 billion in 2020
Airlines have issued bonds worth $88 billion in 2020

The value of bonds issued by airlines all over the world in 2020 alone is way over half of the total bond issuance value of the past four decades. All sorts of lame jokes made surprise landings on the barren runways of our mind the moment we came to know of this. For instance, even as airlines grapple with the pandemic having left them at a fraction of their usual traffic, what secret agent is it relying on to bail them out Well, the name&rsquos Bond, Paper Bond.

As the scourge of the Coronavirus theoretically set to ebb with successful vaccine trials by BioNTech SE and Pfizer Inc., the Bloomberg World Airlines Index shot up by 9.7%. That&rsquos not all&mdashshares in Cathay Pacific Airways soared to their highest since 2008 while those in Singapore Airlines reached their highest since 1999, after Hong Kong and Singapore announced their air travel bubble starting November 22. Bizarrely enough, stock in the defunct Jet Airways spiked to 150% after reports of two new owners came in earlier in November.

At a time when ticket sales are cutting a sorry figure, cashflows from investing and finance alone have brought some airlines close to three times as much money (figures for Delta Air Lines and United Airlines). According to Bloomberg data, airlines have issued bonds worth $88 billion in 2020 alone, as against the $153-billion figure of the preceding four decades.

In September, Irish budget carrier Ryanair issued &euro850 million in five-year bonds after raising &euro400 million in share placement. Finnish carrier Finnair raised &euro200 million in hybrid debt, that too with a 10.25% coupon rate.

In a bid to shore up its finances, Japan Airlines has announced its plan to raise $1.6 billion through an equity finance plan&mdashpublic offering and third-party allotment. The airline is also talking about bringing on board energy efficient aircraft. The $6.5 billion rights issue by Singapore Airlines this June was recorded as the highest-ever additional equity raised by an airline.

Low-cost carriers such as easyJet, United Airlines and Wizz Air, too, have utilized alternate financing models and sale and leaseback of existing fleet and assets to boost liquidity. Aerospace giant Boeing, too, had announced a $25-billion issue earlier this year&mdashsign enough that industry and investors alike are hopeful of a resurgence in air travel soon.

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