Investors see lower risk of default by US airlines

The price of insuring against a debt default by US airlines has fallen sharply as investors anticipate the industry will get a new round of bailout funding to help see it through to a coronavirus vaccine next year. Even as the country’s main carriers burn through cash at a rate of tens of millions of dollars a day, and the pandemic continues to rage across the US, prices for airline credit default swaps have fallen to levels not seen since March or, in some cases, February. Share prices for the big four carriers — American Airlines, Delta, United and Southwest — have also risen, outpacing the broader stock market since the first vaccine trial results were published a month ago. “The immediate existential threat has receded,” said Berenberg analyst Adrian Yanoshik. “And the very obvious second act of this is a lot of people feel like vaccines are coming, the world will open up and we’ll travel again next year.” The cost of credit default swaps, which pay out when a company defaults on its debts, is now a fraction of their peak in May, as airlines have tapped both government and private market funds to improve their liquidity positions. CDS prices act as a proxy for the market’s view of a company’s creditworthiness. They have tumbled again in recent weeks, by between 38 and 67% for the four big carriers. Story has more details.<br/>