Delta airdrops cash to avoid getting junkier
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/>
https://portal.staralliance.com/cms/news/hot-topics/2022-07-20/sky/delta-airdrops-cash-to-avoid-getting-junkier
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Delta airdrops cash to avoid getting junkier
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/>
