Alaska Airlines secures USD1.2 billion loan, to use aircraft as collateral

About $1.2 billion have been secured in private loans by Alaska Airlines to safeguard the airline's financial woes during and after the coronavirus pandemic. The Pacific North-west airline will use 61 of its owned aircraft as collateral. Of the airline's fleet of more than 300, consisting of aircraft from Boeing, Airbus, Bombardier and Embraer, 26 Boeing 737-800s, 16 Boeing 737-900ERs, and 19 Embraer 175s are being listed as collateral.

16 of Alaska's 737-900ERs are being listed as collateral. Photo by Devin Ruhotina | AeroNewsX

This will part of an Enhanced Equipment Trust Certificate (EETC) offering. EETC is a form of the “Equipment Trust Certificates” that is issued and managed through special purpose vehicles known as pass-through trusts. As quoted by Investopedia, “Airlines commonly use EETCs very often, raising billions in financing for their aircraft purchases because of their high capital spending requirements.”

The aircraft will remain grounded until the debt is repaid in different time slots. One payment labeled Series A, which is $966 million, will be due by August 15, 2027, and the other payment labeled Series B, which amounts to $208 million, will be due by August 15, 2025.

Shane Tackett, Alaska's executive vice president of finance and the chief financial officer said,

"We're proud of what our people have built at Alaska. Because of our long-standing commitment to conservative financial management and a strong balance sheet, we were fortunate to see strong demand for our offering, With this financing and the actions we've taken to reduce our cash burn rate, we've created a liquidity runway that rivals our strongest competitors."

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