AirTran Gets Credit Boost
ORLANDO, Fla. (
) --
AirTran
(AAI)
has signed two deals that will bolster its credit position, another indicator of enhanced airline industry access to financial markets.
AirTran said Wednesday that it has reached separate agreements with the Bank of Utah, its principal credit facility lender, and with
US Bank
(USB) - Get Report
, its largest credit card processor. The carrier, which has said it will be profitable in every quarter of 2009, expects to end the current quarter with more than $400 million in unrestricted cash and short-term investments.
In the deal with Bank of Utah, AirTran increased the amount it can borrow under its revolving line to $125 million from $90 million. This enabled the carrier to reduce a more costly letter of credit facility, which stood at $150 million in July 2008 and at $125 million in October 2008, to $50 million today, and to reduce the total amount of its credit facility from $215 million to $175 million. Additionally, the expiration date of both credit sources has been extended until Dec. 31, 2010.
"Having more cash has given us better flexibility," said Steve Rossum, executive vice president. "The $125 million can be used for anything we seek to do, and the $50 million can be pledged to credit card processors in lieu of cash."
On the credit card processing side, AirTran and US Bank agreed to extend the current agreement from Dec. 31, 2009 to Dec. 31, 2010. Additionally, AirTran is no longer subject to cash holdbacks with its two principal credit card processors, a result of the enhancement to its credit facilities and revised covenants with the processors.
In recent weeks, three major airlines have announced financing deals.
AMR
(AMR)
raised $4.4 billion through aircraft financing, the advance sale of miles to its credit card processor and public sales of stock and notes.
Delta
(DAL) - Get Report
raised $2.1 billion, generating $600 million in liquidity after refinancing $1.5 billion of
Northwest
debt.
US Airways
(LCC)
raised $137 million by issuing common stock.
-- Written by Ted Reed in Charlotte, N.C.
