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American plans to use loyalty program as collateral for Fed loan
American Airlines’ AAdvantage loyalty program will become collateral for a $4.75 billion loan under the government CARES Act.
The airline says it more than covers the cost of the loan.
According to airline CFO Derek Kerr, the program has a value of between $18 billion and $30 billion.
"The AAdvantage program is considered collateral for the government debt," Kerr told the Wolfe Global Transportation Conference.
Kerr said the government are ‘on board’ with the idea but the deal is ‘not complete yet.’
"We haven’t figured out the total structure," Kerr said.
The airline hopes to have it wrapped up by June.
"We have slots, gates and routes we lease against. This is just another asset," Kerr added.
Responding to questions about its ability to navigate the Covid-19 crisis, Kerr said American ‘is going nowhere.’
Apart from AAdvantage, American had about $10 billion of unencumbered assets in March before the travel slump brought on by the pandemic.
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