Airlines struggle to take off in face of $300b debt headwinds

The world’s largest airlines have built up a mountain of more than $300b in net debt, a sign the pandemic will hamper recovery for years as carriers face paying back huge bills from rescue financing and state support. With hopes of a limited restart to travel in the summer, attention is turning to how quickly airlines can heal their balance sheets after the biggest crisis in aviation history. “Liquidity is and has been of great importance to always make sure we have enough cash to manage the situation,” easyJet CE Johan Lundgren said. But there is now a big price to pay after shareholders, debt markets and state support schemes provided essential liquidity to help the industry survive a collapse in passenger numbers and avoid widespread corporate failures. Although companies are sitting on cash and short-term investments of $140b, up from $90b at the start of the year, their net debt has also risen by $60b over the same time to $320b, according to FT analysis using FactSet data of the balance sheets of the 50 biggest airlines. The four big US carriers — United, American Airlines, Delta and Southwest — have led the way in raising money, bolstered by more than $60bn of government aid. In Europe, Air France-KLM and Lufthansa have been shored up by billions of euros in state support, while British Airways owner IAG tapped shareholders for E2.75b, received a GBp2b state-backed loan from the UK and raised E1.2b in a bond issue this week. Airlines came into the crisis in broadly better shape than before the financial crash in 2008, allowing them to raise billions quickly, according to Jonathan Root, a senior vice-president at rating agency Moody’s. “Credit markets were there for the companies from day one,” he said. “If this was 2008, we would be having a different discussion today.”<br/>