Originally Posted by
galaxy flyer
For two generations, inflation has been relatively low and controlled. Not zero, but okay. Wait til the politicians forget the past, as they have, and we see inflation at 7%-10%, interest rates above 12%, mortgage rates at 12%, housing prices stuck because few can qualify for mortgages, government interest costs north of $1.5 trillion (today it’s at $500 billion), every bond auction a nail-biting exercise for Treasury. Then, we’ll see the effects of these insane policies.
More to the point for the airlines, several airlines have big tranches of bond issuances coming due in the next year to two. These bonds were originally sold at reasonably low coupon (~3_4%). But the airlines haven’t made the sort f profits due to COVID that would allow them to pay off these bonds at maturity which means they’ll have to be paid off by issuing new bonds based upon the same (aircraft) collateral. Except the aircraft themselves are no longer new and not worth as much as collateral and the bond coupon rates (and hence the debt service) will be considerably higher.
https:/
https:
url]