American Airlines Prepays U.S. Government Loans, Terminates Agreement
American Airlines has closed their previously announced $10 billion in financing secured by the AAdvantage® loyalty program. The airline has used part of the proceeds to satisfy their secured loan with the U.S. Treasury, thereby terminating all associated commitments.
On Wednesday (March 24, 2021), American Airlines announced that they have closed their $10 billion financing deal backed by the carrier’s AAdvantage® loyalty program. The airline has used a portion of the proceeds to prepay a secured loan from the U.S. Department of the Treasury, thereby terminating their commitments under the loan agreement. Under the U.S. CARES Act, a $25 billion loan facility was made available to U.S. airlines. American Airlines was allocated $7.5 billion, secured by the AAdvantage program, for a term of approximately five years.
American Airlines borrowed $550 million in September 2021 under the terms of the loan facility and issued Treasury warrants to purchase up to 4,396,483 shares of common stock at $12.51/share. As of today (March 24, 2021), American Airlines has prepaid the $550 million obligation and terminated the loan agreement.
In Wednesday’s announcement, American Airlines’ Chairman and CEO, Doug Parker, said,
“This prepayment is a shining example of the importance of the CARES Act. Our industry was in danger of shutting down one year ago when the CARES Act was passed. This important legislation, including the $25 billion secured lending program for airlines, demonstrated that our leaders understood the challenges facing our economy, and their quick action stabilized our industry and kept our workforce intact.
“American couldn’t have borrowed $7.5 billion against our AAdvantage program during the uncertainty of 2020, but the CARES Act provided the bridge that allowed us to efficiently raise $10 billion through the public markets earlier this month. We wouldn’t be in the position we’re in today without that bipartisan support, and it is something we will never take for granted. We recognize we have a responsibility to continue safely meeting our country’s transportation needs, and we are pleased to have provided a solid return to taxpayers on this loan. We are excited about supporting the reopening of the economy as our fellow citizens and neighbors across the globe return to the skies.”
American Airlines’ purpose is to “care for people on life’s journey.” Shares in the American Airlines Group, Inc., trade on NASDAQ under the ticker symbol AAL and the company’s stock is included in the S&P 500.
Source: American Airlines