Billion-dollar debt mountain poses invisible threat to airlines

Airlines are struggling to get back into the skies following two years of travel restrictions, leaving passengers facing a frustrating barrage of delays and cancellations. But when the disruption clears, the invisible impact of the pandemic will hang over the industry for years to come, as the world’s biggest carriers work to deleverage their balance sheets from billions of dollars in debt accumulated during the crisis. Ten of the leading airlines in the US and Europe have built up $193b in gross debt between them over two years, up from $109b in 2019. “This accumulation of debt is huge. There is no quick fix to this particular problem,” said Izabela Listowska, a credit analyst at S&P Global Ratings. Some airlines with weaker balance sheets have already stumbled. Earlier this month Scandinavian airline SAS filed for bankruptcy protection in the US to allow it to restructure its finances, following rival Norwegian, which went through bankruptcy and debt restructuring in 2020 and 2021. For now, big airlines are in a much stronger position. The major carriers in the US and Europe are insulated by a wall of cash built up from a combination of shareholders, debt markets and in many cases national governments. In the US, some have put up their frequent flyer programmes as collateral to raise money, while in Europe Lufthansa received a E9b bailout from the German government, which it has already paid off. British Airways owner IAG raised E2.75b from shareholders and tapped corporate debt markets, including a GBP2b state-backed loan. "A lot of the cash that was raised through debt is sitting on the balance sheets,” said Jonathan Root, a senior vice-president at rating agency Moody’s.<br/>