Delta will use frequent-flyer program to back $6.5 billion in debt

  • Delta joins American and United with plans to use its frequent-flyer program to back new debt.
  • Atlanta-based Delta plans to borrow $6.5 billion more to help weather the coronavirus pandemic.
  • Airlines have scrambled to shore up liquidity as bookings tumbled because of the virus.

Delta Air Lines said Monday that it will borrow $6.5 billion backed by its frequent-flyer program, the third airline to tap loyalty platforms to shore up liquidity during the coronavirus crisis.

The airline plans to sell senior secured notes and enter into a new credit facility, both backed by its SkyMiles program. SkyMiles will lend the net proceeds of the bond offering to Delta, although a portion will go to a reserve account.

United Airlines announced plans in June to use its frequent-flyer program, MileagePlus, to back a $5 billion loan. American Airlines has said it also plans to use its program to as collateral for a nearly $5 billion federal loan.

Delta shares were up 1.6% in premarket trading after it announced the new debt plan. 

The Atlanta-based airline and its rivals have scrambled to shore up liquidity as the coronavirus pandemic devastated travel demand this year. The $2 trillion CARES Act in March set aside $25 billion in airline payroll support that prohibits job cuts until Oct. 1 and made available another $25 billion in federal loans. Delta said it doesn't plan to pursue the loan, joining Southwest Airlines in sticking with other sources of liquidity.

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