27-Aug-2010 10:40 AM

Investment houses look at airline asset back bonds

Pacific Investment Management Co (Pimco) and TCW Group Inc are investing in bonds from Delta Air Lines and United Airlines (Bloomberg, 27-Aug-2010). The enhanced equipment trust certificates are guaranteed by aircraft owned by the carriers. The companies believe US carriers are refraining from adding capacity to protect profitability, preserving the value of their aircraft.

Pimco: “I particularly like these bonds because you’re very much collateralised and yet the yield is very compelling. Because the airline industry has taken capacity out of the system and because China and the emerging markets are booming, the demand for aircraft has been rising,” said Mark Kiesel, Global Head of Corporate Bond Portfolios. Source: Bloomberg, 27-Aug-2010.

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