Air India parent, the National Aviation Company of India Ltd (NACIL) reportedly announced plans to restructure USD1.12 billion in debt to a dollar-denominated loan or a rupee bond to decrease interest costs (Dow Jones, 06-May-2010). The loan was made in 2009 to finance the acquisition of 21 Airbus aircraft.
Air India to restructure USD1.12 billion debt
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American, Delta and United's varying approaches to shareholder rewards & balance sheet management
The three large US global network airlines – American, Delta and United – are all at different phases of their respective balance sheet evolutions. Delta is enjoying its newly minted status of reaching investment grade according to two ratings agencies; United has decided to expand its level of shareholder returns after lagging its peers in that metric during its still ongoing merger integration. Even after recently deferring some Airbus widebody orders, American remains in the middle of a significant fleet revamp. The company is also still completing certain facets of its merger integration with US Airways, which is one driver for American’s larger cash balances compared with its global network peers.
Each of the three airlines seems to be striving for the right balance of investment in their businesses – maintaining a robust balance sheet and delivering ample shareholder returns. The difference is in the strategies followed.
United Airlines Part 2: Sustaining balance sheet strength while declaring ambitious margin targets
One area where United Airlines has made important strides during the last few years is in overhauling its balance sheet. Its efforts have gained some recognition from credit agencies for its progress in paring down debt and improving leverage ratios; but similarly to its rival American Airlines – attaining an investment-grade credit rating is not a huge priority for United. The airline believes it can achieve some benefits that investment-grade companies enjoy with the current state of its balance sheet.
In order to sustain the progress it has made in balance sheet repair United plans to amend its aircraft order book to slash capex commitments during the next couple of years, including the deferral of 61 Boeing narrowbodies. United is hinting that other fleet changes could be under consideration, including deals similar to the agreement it forged during 2015 to lease used Airbus A319s.
This is Part 2 in a two-part series reviewing United’s financial and revenue-generating opportunities.