American Airlines to raise $1.14 billion through aircraft-backed securities

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.