Delta Air Lines (NYSE:DAL) 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.
Airlines have turned to these programs as they view them as more resilient: customers may not be flying during the pandemic but they could generate revenue when they use co-branded credit cards. Delta said cash from the sale of miles to its credit card partner American Express fell by less than 5% to $1.9 billion in the first half of the year. Total miles redeemed, meanwhile, fell by 78% in the first half of the year.
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 (NYSE:LUV) in sticking with other sources of liquidity.
Despite a slight uptick in summer, air travel demand has hovered at around 30% of last year’s levels, forcing airlines to trim capacity.
DAL shares climbed 73 cents, or 2.3%, to $32.42.
