The failure of United Airlines’ recent $2.25 billion private notes offering does not mean that the machine of capital market funding for airlines is “broken” an Airfinance Journal webinar was told.
Speaking on the “Cash Burn & Liquidity” webinar on 14 May, Bryson Monteleone, senior advisor, PwC said the failure of the offering on 8 May was down to a confluence of a handful of factors, including bad timing.
“I think going forward the machine isn’t broken,” he said, adding that airlines will continue to tap the capital markets.
Monteleone said that part of the explanation could be “high yield sector fatigue” with so many US airlines seeking to tap the market in recent weeks.
High yield structures, airlines tapping available asset liquidity if there is such a thing right now.
Financiers will also be aware that there are upcoming bridging facilities with American and Delta Air Lines, “so you know there is more coming down the pipeline”.
He said the collateral offered by United of 18 or 19 year old aircraft may have been a factor as these may not remain in the fleet in the coming years.
“The story wasn’t being presenting as well there here is an airlines that has to rationalise its fleet and here are the aircraft types how do you connect the dots when say you need to leverage these aircraft when those aircraft may not be in situ going forward,” he said.
Monteleone said that Warren Buffet’s decision to sell his US airline positions via a $6 billion trade in May would not have helped the situation.
"Is the market broken? No. Is there probably more to come at some point? Yes. Can United go back in again with some new collateral, take a second look, get a second bite of the apple? Sure".
But he said there was no reason that United could not try to go to market again, potentially with a different mixture of assets.
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