Over-Leveraged American Airlines Takes Another Big Step to Pay Down Debt

American Airlines leadership knows they have a debt problem. That’s why the carrier is aggressively repaying its obligations with an unexpected payment of more than $1b this week. The Fort Worth, Texas-based airline repaid early a $1.18b term loan backed by its slots at New York LaGuardia and Washington Reagan National airport Monday, according to a filing with the Securities & Exchange Commission. The debt was not due for another year, or until December 2023. And the payment was unexpected after American Chief Financial Officer Derek Kerr said in October that the airline would only repay roughly $540m in debt during the December quarter. Despite the news, American remains one of the most leveraged major US airlines and, while not necessarily in jeopardy, on many analysts’ lists of companies with high debt loads. American had $34b in long-term debt and finance lease obligations, excluding debt that is due within 12 months, at the end of September. That number balloons to nearly $53b when including all liabilities, including unfunded pension obligations. Much of that leverage came from its fleet renewal program during the 2010s that saw it replace hundreds of older Boeing 757 and 767, and McDonnell Douglas MD-80 aircraft, with new Airbus and Boeing models. American’s long-term debt and finance leases load was down from a pandemic peak of $37.2b in the first and second quarters of 2021, but up $12.5b from the end of 2019.<br/>