American Airlines is contracting a $ 1 billion line of credit from Citibank as airlines seek cash to stay afloat in the event of further financial hardship in the travel industry.
American announced the deal Thursday, giving it $ 8.4 billion in “free cash flow,” including $ 4.2 billion in unearmarked cash, to prepare for the coming months, the company said.
Airlines, including United and Southwest, have turned to banks for loans as the coronavirus pandemic disrupts the aviation industry.
Airlines shares fell on Wednesday, including a 25% drop for U.S. stocks, after news broke that congressional leaders were only considering $ 50 billion in loans and no more than $ 25 billion. dollars in government grants that many hoped for.
American, based in Fort Worth, is among airlines that have already taken unprecedented steps to cut spending. It will reduce thefts in the coming months, freeze hiring and offer unpaid leave to most of its unionized workers. He also suspended share buybacks.
American also parks most of its widebody fleet as it has significantly reduced its international flights and plans to withdraw its Boeing 757s and 767s.
Including the regional airlines it owns, American has approximately 130,000 employees, including more than 33,000 in North Texas.
“COVID-19 is a greater threat to airlines and aerospace than any previous crisis,” a Cowen analyst report said Thursday.
Aviation industry groups say airlines may need government help to weather the emerging crisis.
“The magnitude of the current industry crisis is much worse and far more widespread than September 11, SARS or the 2008 global financial crisis,” IATA Managing Director and CEO Alexander de Juniac. “Airlines are fighting for their survival. “
American’s billion dollar loan matures in a year.