American Airlines goes all-in on a $15b debt-cutting plan

The new chief financial officer of American Airlines Group Inc. has a message for skeptical voices in the credit community as the company seeks to secure a ratings upgrade: The $15b debt-cutting plan is on track. After spending around $24b to upgrade its fleet in the run-up to the pandemic, following a bankruptcy and the merger with US Airways, the nation’s most-leveraged carrier is halfway through its biggest ever debt-reduction program. Two months into the job, CFO Devon May is upbeat about the carrier’s ability to generate sufficient revenue through 2025 to raise its credit standing from B- to BB, in what would be the strongest rating since the merger about a decade ago. High costs for labor and jet fuel — not to mention the threat of a severe recession — may yet throw a wrench into the plan. But with the US economy still firing on all cylinders, profits are returning to the business, helped by diminished capacity across the airline industry and higher fares. “What you’re going to see from us over the next decade or so is just a more balanced approach to capital,” May said in an interview with Bloomberg News. The company is signaling a new era of budgetary restraint is a priority, against the backdrop of higher interest rates, a $12b capital-expenditure program through 2027 and big debt payments on the horizon in 2025. By the end of the year, American is aiming to bring a key leverage metric — net debt to earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs — to the lowest since 2017. It also plans to pay down $2b to $3b in debt using free cash flow this year, according to May, 47. “We’ll obviously have some just baseline level of growth that’s going to require some amount of capital expenditures, but you probably aren’t going to see the fluctuations like you saw pre-pandemic,” May said.<br/>