Tags: airlines | cash

In Trouble, Airlines Stockpiling Cash

By    |   Friday, 02 Jan 2009 10:59 AM

U.S. airlines are succeeding at building cash reserves against the possibility of a global recession by selling stock, selling and leasing back planes, refinancing assets, and tapping the debt markets for secured loans.

They are also turning to vendors and suppliers who stand to lose money if airlines — which have been largely unprofitable and burdened by poor debt ratings — fail.

"Airlines continue to defy expectations by raising more cash," Standard & Poor's airline analyst Philip Baggaley told The Wall Street Journal.

"But the cookie jar is getting close to empty for many of them,” Baggaley warns.

“Assets that could be turned into cash already have."

And, while lower fuel prices have made 2009 prospects brighter, they have also put airlines that signed contracts to lock in fuel prices when they were higher at a serious disadvantage.

Both Delta and United Airlines have had to post hundreds of millions of dollars in collateral to trading partners on fuel-hedging contracts.

The International Air Transport Association has warned that the aviation industry faces its worst revenue environment in 50 years, Business Week reports.

"Last December I remember being in a very buoyant mood, telling you all that the airline was in excellent shape and the overall picture was very healthy," Hong Kong's Cathay Pacific Airways CEO Tony Tyler wrote in a recent company newsletter.

"Now, as 2008 draws to a close, we are facing very uncertain times and the mood has turned decidedly somber."

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U.S. airlines are succeeding at building cash reserves against the possibility of a global recession by selling stock, selling and leasing back planes, refinancing assets, and tapping the debt markets for secured loans.They are also turning to vendors and suppliers who...
airlines,cash
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2009-59-02
Friday, 02 Jan 2009 10:59 AM
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