Air travel has been tough lately, as plenty of London residents already know. In the US too, airlines are juggling staffing shortages and booming demand. Delta Air Lines is also dealing with a potential credit downgrade into the speculative junk-bond market. The company announced Monday that it will buy back $1.5bn of bonds maturing in 2023 to 2026, and separately, that it has put in orders for 100 Boeing 737-10s. CreditSights analyst Roger King said in a note that the bond buyback is an attempt from Delta to defend its credit rating, which is split between the highest tier of junk and the lowest tier of investment grade. He argued after the airline’s second-quarter results that Delta’s rating was in danger “from increased leverage combined with the sector’s pandemic and geopolitical risks.” And what risks! King said Delta kept its rating in the first place because of “under-investment in fleet renewal to lower total debt and reduce leverage,” but now it has “several hundred aircraft” that are older than 20 years. That’s where the deal to purchase Boeing 737-10s comes in. King has covered that the 737-10s have their own risks, as “certification [is] yet to be received from the FAA and currently depends on complicated political approval.” Lest we forget, the politics may be slightly more complicated after the problems with the 737-MAX. Still, the problems with air travel may not hurt the broader industry much in the long term, he argues. <br/>
sky
Two dueling bids are in for ITA Airways but CEO Fabio Lazzerini is quiet on what direction he sees the Italian government going with the privatization of the airline. A consortium of Lufthansa and MSC Global, a shipping conglomerate, have offered E800-850m for roughly an 80% stake in the airline, while U.S. private equity firm Certares has offered E550-600m for an undisclosed stake. Certares would partner with Air France and Delta Air Lines if their bid is accepted. Both parties submitted their bids to the Italian government on July 5.“Both parties want to build on our business plan,” Lazzerini said of the two offers at the Farnborough Air Show in the UK on Tuesday. But he declined to say anything further on the bidding process, and instead deferred to the Italian government. The government is reported to favor the Lufthansa and MSC offer as it would provide better “economic, strategic and social prospects” for the airline and country. However, a political crisis in Italy that could result in the resignation of the prime minister on Wednesday, July 20, could affect the process. The bidding carries big stakes for all four airlines involved. Italy is Europe’s third largest aviation market and, while ITA lacks a dominant marketshare, it does have key hubs and lucrative slots in both Milan and Rome. The airline’s business plan calls for expanding its Rome Fiumicino hub into an intercontinental transit point rather than a destination for most travelers.<br/>