11 in a row! American Airlines soars after obtaining USD2.9 billion in additional liquidity

North and South American airline stock continued their hot streak yesterday, though gains were softer on Thursday (17-Sep-09). The AMEX Airline Index (+1.8%) was still up however, due to massive one-day gains by American Airlines (+19.7%) and US Airways (+17.1%), resulting in the index’s 11th consecutive daily increase.

The lift was further assisted by steady oil prices (-0.1%), to USD72.47. The Dow eased 0.1%.

American Airlines obtains USD2.9 billion in additional liquidity and new aircraft financing

American Airlines (+19.7%) rallied on the back of parent, AMR’s announcement that it has obtained a total of USD2.9 billion in additional liquidity and new aircraft financing, and plans to strengthen its network by reallocating capacity to hubs in Dallas/Fort Worth, Chicago, Miami and New York.

The USD2.9 billion consists of:

  • USD1.3 billion in new liquidity, including USD1 billion in cash from the advance sale of frequent flyer miles to Citi;
  • USD280 million in cash under a loan facility from GECAS secured by owned aircraft;
  • USD1.6 billion in sale-leaseback financing commitments from GECAS for B737s previously ordered by the company.

AMR added that it plans to remain disciplined with seating capacity in 2010, with mainline capacity for 2010 expected to increase by approximately 1% year-on-year, with domestic capacity flat and international capacity up approximately 2.5% year-on-year.

According to Gerard Aprey, CEO and President, the announcement “positions our company well to face today's industry challenges and allows us to remain focused on the future and on returning to profitability.” However, Mr Aprey warned that the carrier “cannot borrow our way to prosperity" and needs to continue to work towards sustained profitability, as “that alone will ensure our long term future".

Continental forecast 3% year-on-year increase in load factor for 3Q2009

Continental Airlines (-1.8%) fell, despite forecasting improved load factors for 3Q2009. Continental stated in a filing during trading that it expects load factor to increase 3 ppts year-on-year during the quarter, to 85%. The load factor improvement comes as a result of an expected 4.2% decline in mainline capacity (ASMs), and 5.1% for 2009.

The carrier added that Premium traffic appears to have improved in Aug-2009, with high yield consolidated revenue down 28% during the month, compared to a 31% drop in Jul-2009 and 35% drop in Jun-2009. 

Continental also anticipates to end the quarter with unrestricted cash, cash equivalents and short term investments of between USD2.5 billion and USD2.6 billion.

North & South America selected airlines daily share price movements (% change): 17-Sep-09