Airlines fly close to downwards debt spiral

Airlines are close to breaking the corporate credit card. Since 2019, the top six network carriers in the United States and Europe have loaded up with an additional $44b of net debt, more than their pre-pandemic EBITDA. Even with a return to normal in 2022 – an increasingly unlikely scenario – paying that off will take years. Alongside flogging planes, laying off staff and asking shareholders for money, airline bosses have borrowed vast sums from banks and capital markets. Taxpayers have also chipped in, with the US Congress approving, somewhat controversially, $54b read more to cover salaries of grounded staff for 18 months. To a large extent, the survival techniques have worked. Only Air France-KLM is close to nationalisation, with the French and Dutch governments holding 29% and 9% stakes respectively. That said, the industry’s debt levels are unsustainable. Since 2019, the three big US carriers Delta, American Airlines and United, and their European counterparts Air France-KLM, Lufthansa and BA-owner IAG have increased net debt by 63% to $112b, according to analyst estimates compiled by Refinitiv. That equates to a whopping 4.7 times next year’s EBITDA. In 2019, the year before the pandemic started, the absolute figure was $69b, just 1.7 times that year’s EBITDA. Story has more.<br/>