In yet another instance of increased airline industry access to financial markets, AirTran Holdings (AAI) announced that it has signed a couple of deals that will bolster its credit position.
AirTran yesterday said that it has entered into separate agreements with The Bank of Utah, its principal credit facility lender, as well as with US Bank (USB), its largest credit card processor.
The agreement with the Bank of Utah would allow the air carrier to borrow $125 million under the bank’s revolving line of credit. Previously, the limit was set at $90 million. The increased access to revolving line of credit would enable AirTran to decrease its cost of funds by reducing the more costly letter of credit facility by $50 million. The expiration date of its combined letter of credit and revolving line of credit has been extended to the end of 2010.
Additionally, the agreement with US Bank has extended the credit card processing agreement to Dec. 31, 2010, from Dec. 31, 2009. Moreover, AirTran is not subject to any cash hold-backs its two largest card processors.
Amid soft demand for air travel, these twin agreements would help the company to improve liquidity and financial flexibility. AirTran expects to end the current fiscal quarter with more than $400 million of unrestricted cash and short-term investments.
With improved outlook about the airline industry fundamentals, major airlines such as AMR Corporation (AMR), Delta Air Lines Incorporated (DAL), US Airways Group Incorporated (LCC) and United Airlines (UAL) have recently announced financing deals.
Read the full analyst report on “AAI”
Read the full analyst report on “USB”
Read the full analyst report on “AMR”
Read the full analyst report on “DAL”
Read the full analyst report on “LCC”
Read the full analyst report on “UAL”
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