United Airlines uses loyalty programme to secure USD 5bn loan

- A Monitor Desk Report 20 Jun, 2020 | 854 Views|-+
Dhaka: United Airlines announced on June 15 that it is securing a USD 5 billion loan backed by its MileagePlus loyalty programme, further buffering its liquidity even as bookings hit by the coronavirus pandemic improve.

Chicago-based United said that if it also decides to a tap USD 4.5 billion government loan before September 30, it would have USD 17 billion in total liquidity.

This would be enough to carry it through a potential second or third wave of the coronavirus pandemic, senior executives said.

Under the loan deal structured by Goldman Sachs, Barclays Bank and Morgan Stanley Senior Funding, United will retain control over its loyalty programme, valued at about USD 20 billion, the airline executives added.

Slots, gates and routes could be used as collateral for the government loan, the company said. Rival American Airlines has said it could use its loyalty programme as collateral for a government loan.

United sees its daily cash burn slowing to USD 30 million per day by the end of the third quarter, and said it could reach break-even by the end of the year, as American and Delta Air Lines have forecast, depending on how demand evolves.

The airline said ticketed passenger revenue has jumped for June and July versus April, when US passenger numbers reached a record low, but said July revenue would still be down between 82 per cent and 88 per cent from a year ago.

It still expects demand to be down on October 1, when billions of dollars in government payroll aid for airline employees runs out.

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