Correct. The pass through certificates were collateralized by new A321 and E-175 aircraft that were worth more than the certificates were sold for, allowing them to be rated BB+ which on the Fitch and S+P scales is investment grade, albeit at the low end.

 

Alaska is A1 rated I believe.

 

“Transaction Summary: The class B certificates are an add-on to the class A certificates announced on Oct. 25. Fitch rated the class A certificates 'A'. The class A certificate ratings are unaffected by the issuance of the class B certificates.”

 

Yep. They rated two different tranches of certificates with different ratings. With good collateral (a lot of new aircraft or support equipment for instance) you can (generally) up the rating of your certificates to (generally) allow borrowing at a lower rate. What actually determines the actual effective rate is what people are willing to pay at auction at the time of sales, and that is dependent on buyer sentiment and - especially - buyer expectation of what else they can do with that money. While collateralization somewhat protects bond and certificate buyers against the possibility of loss IF THE BONDS OR CERTIFICATES ARE HELD TO MATURITY if they need to be sold before maturity (in the secondary market) at a time of higher bond yield, the sellers can still lose money on the investment. Similarly, if buyers tie up their capital for years by buying currently priced bonds or certificates, they will forfeit the opportunity to invest that capital at higher rates shoukd inflation ouch up bond coupons. And the protection is “somewhat” because all the collateral is in aircraft related equipment and in the event of another black swan event affecting flying (pandemic, war, $300 a barrel oil, etc.) the value of these items could plummet and the certificate owners wind up actually losing money.

There is a whole financial industry that works these issues and the only guaranteed winners appear to be the underwriters and the rating agencies themselves, who take their cut of the action off the top.

The write up by the ratings agencies are particularly interesting because they give what the ratings agencies believe to be critical issues to watch for the company’s rating. Example:

And to a limited extent these rating agency statements become a self fulfilling prophecy since lower ratings affect the market to cause higher debt service costs for the lower rated companies.

 

Just let me know when it's time for me to buy that van for down by the river!

 

Don’t forget to get your financial house in order before things fall apart!

 

if your house isn’t in order now it’s too late, duh! Have you learned nothing from the doomsday-ers on here?!

 

here is a idea
what if everyone that is at Envoy, Piedmont, PSA that is with in one year of flowing to AA is given a AA seniority number, but they stay at the regional until flow date. You could throw in retaining pay seniority when you flow as well (better than retention bonus) You then would never have a problem staffing a wholly owned regional. It’s free for AA and they can merge each wholly owned by hire date and last four of social when they give out the seniority numbers. just a thought.

 

So someone hired from say the military will watch Eagle pilots consistently move in ahead of them on the seniority list as new hires for the first year? Ya that’ll dry up the application pool in a hurry.

 

Well to be fair, Eagle pilot’s WERE on the AAG payroll FIRST. So….


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