American Airlines Joins Debt-Market Behemoths

Financing boosts the carrier’s total obligations to $50 billion dollars

Matt WirzMarch 17, 2021 5:30 amAmerican Airlines Group Inc. raised $10 billion of debt last week to repay government loans and keep its business running as the economy recovers. The deal also boosted the company’s debt by about 20%, transferring much of that risk onto debt investors.

American has survived the pandemic by taking on $22 billion of new debt, bringing its total obligations to $50 billion. Borrowing saved the company—and others like Carnival Corp. and AMC Entertainment Holdings Inc.—from bankruptcy, but it comes with higher interest costs that could affect profitability for years to come.

The deal has freed American of its obligations to the U.S. taxpayer and positioned the company to benefit from a potential economic boom the likes of which Wall Street hasn’t seen in decades. Economists have boosted forecasts for economic growth this year to about 6% in response to the $1.9 trillion Covid-19 relief package Congress passed this month. American’s shares have risen 55% this year as domestic travel bookings picked up.

“For the first time since the crisis hit…we at American are not looking to go raise any money,” American’s chief executive, Doug Parker, said Monday at a conference hosted by JPMorgan Chase & Co. Even after accounting for roughly $30 million of cash burned each day, American expects to have $17 billion of liquidity at the end of March and no major debt coming due until 2023.

Mr. Parker called the $6.5 billion of bonds and $3.5 billion of loans American issued on March 10 “the largest transaction in the history of commercial aviation.”