The financing package worth $15.6bn is expected to be approved in the upcoming weeks, as the management of the United Airlines seeks to raise enough capital to properly handle the financial turbulence caused by the Covid-19 pandemic. This comes in form of a multi-year credit facility provided by a group of banks, which includes Goldman Sachs, Bank of America, and JPMorgan Chase & Co. This collateralized loan is expected to be secured by the accounts receivable and Loyalty assets of the carrier.
The package according to reports is expected to be the largest funding in the commercial airline sector since the outbreak of the pandemic, indicating how much the industry has been badly affected. Airline business has been hit hard in the past year due to travel restrictions, decreased customer demand, and flight cancellations due to the pandemic, leaving many carriers struggling financially. As such, to survive in the coming times, airline companies must be well-capitalized.
The funds made available to United Airlines are expected to be used to settle existing debts, as well as for other general corporate purposes. The airline also announced its expectations to record further losses for the first quarter of 2021. This underscores the need for the fresh funds it needs to stay afloat. United Airlines is hoping that as the world recovers from the pandemic, there will be an upsurge in the demand for air traveling, which will help the airline regain its footing and eventually offset these losses.
Many other airlines, such as Delta and American Airlines, have also attempted to improve their balance sheet by taking advantage of the low-interest rates in the market to liquidity. Additionally, commercial airlines have resorted to reducing costs and laying off staff to ensure they remain viable businesses during these tough times. The Covid-19 outbreak has taken a heavy toll on the aviation industry, and many airlines are counting on the vaccines helping the world return to a pre-pandemic state.
In conclusion, the financing package that United Airlines is set to receive shows that the aviation industry is not yet out of the woods. The industry has been hit hard over the past year by the pandemic and is in dire need of funds to stay afloat. United Airlines is expected to use the funds to handle existing debt obligations, as well as for general corporate purposes. Other players in the aviation industry have also secured fresh funds through approaching the market for low-interest loans or cost-cutting measures. At this point, only time will tell whether or not these measures will be enough to revitalize the industry.
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