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The airline industry is crippled by its debt load. They borrow money to buy a plane, and hopefully make money flying it around to make the payments. When the pl
by taxicabjesus 10y ago
The airline industry is crippled by its debt load. They borrow money to buy a plane, and hopefully make money flying it around to make the payments. When the plane is finally paid off, it's ready to be replaced.
I had an anecdote about a Hawaiian Airlines' maintenance problem:
http://www.taxiwars.org/2015/03/airplane-maintenance.html http://www.taxiwars.org/2015/03/airplane-maintenance.html
- hendzen 10y agoWrong. There is actually a niche of financial engineering used to work around this problem known as aircraft securitization. Airlines don't buy the planes directly, they set up separate corporate entities (SPVs) that purchase the planes with cash generated by issuing bonds. The airline then leases the plane from the SPV and the bondholders are paid with the lease payments. The collateral in this case is usually the plane itself, and if the bonds go bad the bondholders are first in line for any payments from liquidating the SPV collateral. Also, the debt stays off the books of the airline.