American Airlines is raising a combined $1.14 billion through the sale of aircraft-backed securities, and plans to use the proceeds to fund new planes, refinance existing aircraft and support general corporate needs, according to securities filings on Monday.
The decision comes at a time when US airlines are cutting capacity and slashing profit forecasts as fuel prices jump faster than demand growth.
Jet fuel usually accounts for a quarter of an airline’s operating cost. The airline said last week it expects its jet fuel bill to rise by more than $4 billion this year as fuel prices remain higher at about $4 a gallon in the second quarter.
American plans to use the proceeds raised from the two debt securities to fund 17 new planes and refinance loans for 15 existing aircraft.
Known as enhanced equipment trust certificates, such securities allow companies lacking investment-grade credit ratings to borrow from investment-grade markets.
S&P Global Ratings has assigned an ‘A’ rating for the longer of the two securities, under which American will raise $905 million. The shorter security worth $235.8 million has been rated ‘BBB’. American Airlines, on the whole, is rated B+ by the agency.