US airlines increased the size of debt and equity fundraisings this week to nearly $10bn after receiving a warm reception from investors, continuing an industry-wide capital binge triggered by the pandemic.

American Airlines was seeking on Wednesday to raise a $1.5bn bond and $500m loan, to add to a $2bn fundraising on Tuesday split roughly evenly between shares and convertible notes. The $4bn goal is $500m more than originally sought. The new bonds will be backed by American’s routes, slots and gates at airports across the globe.

It follows Alaska Airlines on Tuesday, which raised close to $1bn of debt, up from a proposed $674m, backed by 61 aircraft, representing 28 per cent of the airline’s fleet. 

Meanwhile, United Airlines is looking to raise $3bn in bonds and $2bn in loans by the end of the week, in a previously announced deal that uses the brands, member data and cash accounts of the Chicago airline’s frequent flyer programme as collateral.

“There is a lot of creativity in how to access capital,” said John McClain, a portfolio manager at Diamond Hill Capital Management. “For companies like these, anything that isn’t bolted to the wall is for sale right now.” 

The flurry of deals comes as airlines seek to staunch daily cash outflows in the tens of millions of dollars, as they continue to operate emaciated schedules. US demand for air travel has improved since the spring but remains historically low.

Capital markets have been buoyed by support from the Federal Reserve, helping boost investor confidence and open up the floodgates for companies looking to raise cash to see them through the pandemic.

“Airlines don’t know how long this downturn will last,” said Helane Becker, analyst at Cowen. “Right now the Fed is being accommodating, so beef up the balance sheet, raise a lot of liquidity and be in a position to win the recovery. In fact, be in a position to be there for the recovery.”

So far, capital markets and lenders have largely delivered. Ms Becker calculated that US airlines have raised $46.5bn this year, not counting the $50bn government aid package legislators approved in March.

But investors have been discriminating based on which airline is coming to market. Alaska will pay an interest rate of 4.8 per cent on the seven-year debt it raised on Tuesday, while American’s five-year bond was on Wednesday being offered to investors with a yield of between 11 per cent and 12 per cent, according to people familiar with the pricing. 

United’s fundraising, meanwhile, is its second attempt at a deal. A plan to raise debt in May fell through because investors were put off by the older planes pledged as collateral and United was unwilling to pay the high borrowing costs demanded as a result.

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