JediCheese

No one wanted those airplanes (why would you agree to finance old airplanes at the previous value when there's no market for them). I think Delta and SWA aren't junk. United is junk but they can still access the market.

Airlines can hedge most of their costs, so I doubt large inflation would be an insurmountable problem. Even such things as pilot pay get locked in for years in the future via the CBA and inflation has no bearing on that. The real issue is if there's shocks to the system instead of a nice steady climb in inflation.

Back on topic, the US government (the group that can tax) is much more likely to use inflation than taxes to pay off their debts.

Excargodog

One cannot hedge interest expense on future debt refinancing. Not when your credit rating is already junk - and yeah, Delta and SWA ARE junk. Anything not A-rated is junk.


https://www.fitchratings.com/research/corporate-finance/fitch-takes-rating-actions-on-north-american-airlines-10-04-2020

so back on topic, with serious inflation most of the heavily indebted carriers will be forced to go into bankruptcy.

rickair7777

Close but not quite, some of the upper B's are investment grade.

https://en.wikipedia.org/wiki/Bond_credit_rating

Excargodog

Yeah, and S&P, Fitch, and Moody all define things a little fifferently, but except for Alaska, I think all major airline bonds are requiring a 10% yield right now. And on the secondary market, the existing tranches of bonds sold at lower rates 4-5 years ago are going down, effectively making them command a higher coupon, although those sites are all payroll protected.

The point though, is that airlines are ALREADY paying huge amounts in debt service and will be paying even more in refinancing. This summer AA did a bond sale for $2.5 BILLION at 12%. That one transaction alone means an annual debt service of $300 million. And how much OTHER debt does AA have?

We’ll know in another week, but it has to be north of $35 Billion...

TransWorld

Desert restaurant seating, no waiting. Also 3rd world banana republic has seating available. Will replace the DC-3s they are currently flying.

WhiskyWhisky

If you are even remotely thinking about this as a career....run, run like mad. The future is dismal, bleak, horrific.

https://www.reuters.com/article/us-u...-idUKKBN29W0YS

“This is just the start. It will get worse,’' said Brook Simmons, president of the Petroleum Alliance of Oklahoma. “Meanwhile, the laws of physics, chemistry and supply and demand remain in effect. Oil and natural gas prices are going up, and so will home heating bills, consumer prices and fuel costs.’'

rickair7777

Meh. When I switched careers back in the 90's I actually did a very serious analysis of "Peak Oil". There wasn't even the hint of any sort of replacement for petro jet fuel at the time. Today we can fuel the current jets on 100% SAF if necessary. It's more expensive but not unsustainably so, and economy of scale will help with that.

WhiskyWhisky

https://www.nytimes.com/2021/01/27/c...ve-orders.html

https://www.cnn.com/2021/01/27/polit...den/index.html

https://www.youtube.com/watch?v=k5SM1duWDMY

Bend over and grab your ankles. It's coming raw, dry, and abrasive.

9mikemike

MEH, Wrong for sure on SAF. Not viable, not available, not scaleable and not affordable. Of course that can all be fixed like all other green technologies with punitive government measures for traditional energy and 100% percent forced taxpayer support of the “green technology. One more way for the super-elites to become more elite. Sickening

rickair7777

It's plenty viable, and has been demonstrated numerous times.

It can become available, and is certainly scalable... not all SAF is a boutique biomass process, you can make it out of air, water, and electricity. That scales infinitely.

It will cost more than Jet A, but at current niche production scale it's about 4 times more expensive so based on typical industrial scalability it should ultimately cost less than twice what Jet A costs. That's not great but presumably there will be subsidies and ultimately the industry can adapt to it. We're obviously not switching over all at once.

But technically I don't see any alternative, other than catastrophic regulatory caps on dinosaur-powered air travel. SAF is a "drop-in" fuel, that current aircraft designs can use. Alternatives like hydrogen would require total and radical re-designs of the the airplanes $$$$$$$$$$$$$$$$$$$$$$$$$$$$

Unless the green politics can be defeated, but I'm not seeing that either. I've given up whining about it.