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Delta will use its frequent-flyer program as collateral in a $6.5b debt sale, mirroring other US carriers that have tapped the valuable assets to build cash as the coronavirus pandemic and travel restrictions suppress demand. The airline and SkyMiles, a new subsidiary named for the loyalty plan, will be co-issuers of the senior secured notes and co-borrowers under the credit facility, Delta said Monday. Sale of the bonds isn’t contingent on closing the term loan, Delta said. United and Spirit have also tapped loyalty programs to back debt, signaling that financial pressure on carriers isn’t easing as demand for domestic travel remains about 70% below a year ago and international service is almost nonexistent. Delta is raising $4b in bonds in two equal portions maturing in five and eight years, with early pricing discussions around 5% and 5.375%, respectively, people with knowledge of the matter said. Goldman Sachs, Barclays, JPMorgan Chase & Co. and Morgan Stanley are lead managers on the offering, the people said. The airline and its bankers will market the bonds through Sept. 17 and pricing will follow, one of the people said. Delta is raising $2.5b in term loans in a deal led by Barclays. Delta has declined to disclose the value of SkyMiles but said Monday that travel among loyalty plan members has declined along with overall demand. Total miles redeemed in the first half declined by 78%, reducing revenue from loyalty travel awards by 59%, the carrier said in a regulatory filing. Over the same period, cash from miles sales to American Express fell less than 5% from a year earlier to $1.9b from the use of co-branded credit cards. The agreement on the debt offering means Delta won’t pursue a second loan from the US Treasury. <br/>

French Finance Minister Bruno Le Maire said he would guarantee the survival of Air France after his Dutch counterpart warned more cost cuts may be needed to get through the deep industry slump. France will “do what is necessary to guarantee the survival of Air France,” Le Maire said Monday on France 2 television. “We’ve already done a lot, and we will continue.” The French and Dutch government ministers were weighing in on plans by Air France-KLM to cut jobs, capacity and planes to respond to the sharp drop in demand caused by the Covid-19 pandemic. The countries, which own a combined 28% stake in the group, came to the rescue earlier this year with E10.4b in loans and guarantees to its constituent carriers, Air France and KLM. Asked whether the airline will get through the crisis, Dutch Finance Minister Wopke Hoekstra on Sunday said “that is not a given.” Air France-KLM has to adjust its cost base to face the slump and will have to do even more should the pandemic last until the end of next year, he said. The Dutch arm has long been more profitable than Air France, leading to tensions within the group even before the pandemic. In a further sign of the political pressures on Air France-KLM CEO Ben Smith, French Transport Minister Jean-Baptiste Djebbari on Monday said the carrier “can do better” in coordinating a number of its activities including fleet management. “No one really knows what traffic will look like at the start of 2021,” he said.<br/>

Environmental group Greenpeace is to launch a legal challenge to block the Dutch government’s planned E3.4b rescue support for national carrier KLM, arguing green conditions tied to the bailout are not strong enough. The move underlines the debate between economic and environmental interests surrounding air travel, particularly in Europe, and comes despite the government making the state aid conditional on several undertakings by KLM to reduce the impact of flying. In late June the Dutch government approved the state support in the form of guarantees and loans, aimed at sustaining the carrier through coronavirus crisis, which has decimated air travel. Like the French government backing of KLM sister carrier AIr France, the aid included environmental conditions including a reduction in the number of night flights and “an active contribution to sustainability”. But Greenpeace Netherlands has today formally notified the Dutch government that it plans to go to court to force the cabinet to withdraw the state aid to KLM because climate conditions are lacking. “The cabinet is failing to make firm agreements with KLM on pollution control,” says Dewi Zloch, climate and energy expert at Greenpeace. “We want to emerge from this crisis in a green and fair way. This multi-billion dollar subsidy for major polluter KLM is at odds with this.” Greenpeace says it wants the government to impose a maximum number of megatons of CO2 emissions on KLM each year.<br/>

Aeroflot plans to open up its upcoming secondary share offering (SPO), part of state support for the country’s biggest airline, to private investors, three sources close to the deal said Monday. Aeroflot slumped to a 36b rouble ($481m) loss in Q2 after flights nearly ground to a halt amid the coronavirus pandemic. The state has approved an issue of up to 1.7b new shares. The new share issue is more than twice the number of current shares outstanding and will represent 60% of Aeroflot’s enlarged capital. The price is yet to be set by the company. The state plans to buy part of the new share issue as it aims to retain no less than its existing 51.2% stake in Aeroflot, with Russian Direct Investment Fund (RDIF) and VTB also taking part, sources have told Reuters. Aeroflot now wants to open up the deal to private investors, too, the sources said, as the state wants to raise as much cash for its top carrier as possible. State lender VTB is among banks arranging the deal, they said. The offering is expected as soon as in October after all paperwork is finished, two of the sources added.<br/>