The US LCCs Southwest and Alaska Air Group have arguably been two of the country’s most successful airlines measured by balance sheet achievement, compared with the historically dismal performance of the US global network airlines. American, Delta and United have all enjoyed the benefit of shedding debt obligations through the Chapter 11 bankruptcy process, while Southwest and Alaska have managed their debt and cash flows favourably without the help of a clean slate ushered in by bankruptcy protection.
The reward for Southwest and Alaska was attaining coveted investment-grade status from US ratings agencies, which allows those airlines access to credit at favourable interest rates. Southwest enjoys a long-standing investment-grade status and Alaska attained that ranking two years before Delta Air Lines, during a time when it was under attack from Delta at its Seattle hub. Alaska faces some headwinds generated by its planned merger with Virgin America; but for now there is little reason to doubt Alaska’s ability to maintain its balance sheet integrity during the integration.
The other large US LCC jetBlue sits at a different stage in its balance sheet evolution, but its adjusted debt-to-cap performance has significantly improved during the last couple of years. The company’s bolstered balance sheet has provided jetBlue with flexibility to pay cash for new aircraft deliveries in order to maintain an adjusted debt-to-capital ratio of 30% to 40%.
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