Delta will use frequent-flyer program to back $6.5 billion in debt
by Leslie Josephs- Delta joins American and United with plans to use its frequent-flyer program to back new debt.
- Atlanta-based Delta plans to borrow $6.5 billion more to help weather the coronavirus pandemic.
- Airlines have scrambled to shore up liquidity as bookings tumbled because of the virus.
Delta Air Lines passenger planes are seen parked due to flight reductions made to slow the spread of coronavirus disease (COVID-19), at Birmingham-Shuttlesworth International Airport in Birmingham, Alabama, March 25, 2020.
Delta Air Lines on Monday said that it will borrow $6.5 billion backed by its frequent-flyer program, the third airline to tap its loyalty platform to shore up liquidity amid the coronavirus crisis.
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The airline plans to sell senior secured notes and enter into a new credit facility, both backed by its SkyMiles program. SkyMiles will lend the net proceeds of the bond offering to Delta, although a portion will go to a reserve account.
United Airlines in June announced it would use its frequent-flyer program, MileagePlus, to back a $5 billion loan. American Airlines has said it also plans to use its program to as collateral for a nearly $5 billion federal loan.
Delta shares were up 1.9% in premarket trading after it announced the new debt plan.
The Atlanta-based airline and its rivals have scrambled to shore up liquidity as the coronavirus pandemic devastated demand this year. The $2 trillion CARES Act in March set aside $25 billion in payroll support for airlines as well as $25 billion in federal loans. Delta said it doesn't plan to pursue the loan, joining Southwest Airlines in sticking with other sources of liquidity.