American Airlines gets $2.9B, changes routes


POSTED: Friday, September 18, 2009

ATLANTA » American Airlines' parent company said yesterday it is taking on significant new debt at a time when revenues are being hammered, but the $2.9 billion in cash and fresh financing it raised should quiet concerns — for now — that it is in danger of a cash crunch and a bankruptcy filing.

Passengers will see big changes from the nation's second-largest airline, including increased flying in its four hub cities of Chicago, New York, Dallas-Fort Worth and Miami, as well as Los Angeles. However, it will reduce flights in Raleigh/Durham, N.C., and St. Louis, where American is giving up major ground to Southwest Airlines.

AMR Corp. said the extra funding it has received includes $1 billion in cash from an advance sale of frequent-flier miles to Citigroup. The company is treating that money as a loan.

Other major carriers, including Delta Air Lines Inc. and UAL Corp.'s United Airlines, also have done advance sales of frequent-flier miles to raise cash. There is no impact on customers from such transactions. The airline gets cash upfront for miles its credit card partner would provide to card holders as they make purchases. As a forward sale of the miles, the airline would pay interest.

The Fort Worth, Texas, company said it also has received $1.6 billion in sale-leaseback financing commitments from GE Capital Aviation Services, a unit of General Electric Co., and $280 million in cash in a loan from GE Capital Aviation Services secured by aircraft.

The transactions will increase the company's cash balance to roughly $3.7 billion by the end of the third quarter, which is Sept. 30. AMR had $14 billion in total debt at the end of the second quarter. It's unclear how much that figure will increase at the end of the third quarter.