ATLANTA – American Airlines’ parent company said Thursday it is taking on significant new debt at a time when revenues are being hammered, but the $2.9 billion in cash and fresh financing it raised should quiet concerns – for now – that it is in danger of a cash crunch and a bankruptcy filing.
Passengers will see big changes from the nation’s second-largest airline, including increased flying in Chicago, New York, Los Angeles, Dallas-Fort Worth and Miami, but fewer flights in Raleigh/Durham, N.C., and St. Louis, where American is giving up major ground to Southwest Airlines.
AMR Corp. said the extra funding it has received includes $1 billion in cash from an advance sale of frequent flier miles to Citigroup. The company is treating that money as a loan.
Other major carriers, including Delta Air Lines Inc. and UAL Corp.’s United Airlines, also have done advance sales of frequent flier miles to raise cash. There is no impact on customers from such transactions. The airline gets cash up front for miles its credit card partner would provide to cardholders as they make purchases. The Fort Worth, Texas, company said it also has received $1.6 billion in sale-leaseback financing commitments from GE Capital Aviation Services, a unit of General Electric Co., and $280 million in cash in a loan from GE Capital Aviation Services secured by aircraft.
Of the $1.3 billion in new liquidity, all but $55 million will be included in the third quarter 2009 cash and short-term investment balance.
“The announcement today from our perspective takes the liquidity question off the table,” Virasb Vahidi, American Airlines’ senior vice president of planning, said in an interview.
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