Delta plans to follow United with debt backed by loyalty program

Delta Air Lines Inc. is preparing to issue new debt backed by its frequent-flyer program, the latest to use miles to help boost liquidity amid the Covid-19 pandemic.

The airline is set to market new loans and bonds secured by its SkyMiles loyalty program after the U.S. Labor Day holiday on Sept. 7, according to people with knowledge of the matter. The size of the deal and terms, including yield, are still being finalized and could change, said one of the people, asking not to be identified discussing a private matter.

A spokesman for Atlanta-based Delta declined to comment.

The deal would follow United Airlines Holdings Inc.’s issuance of $6.8 billion in new borrowings secured by its MileagePlus program in June, a deal it upsized from $5 billion amid robust investor demand. The package of bonds and a loan was rated investment-grade by Moody’s Investors Service and Fitch Ratings despite the company’s overall junk rating.

Delta’s shares were up 8% to $29.44 at 1:48 p.m. in New York on Monday, amid optimism that the Trump administration may fast-track vaccines and treatments to fight the coronavirus. The Environmental Protection Agency also granted American Airlines Group Inc. emergency approval to deploy a surface coating that kills coronaviruses for as many as seven days, a step that could help restore public confidence in flying.

Delta said last week that it would reinstate 50 flights on international routes later this year. Still, in an industry battered by the pandemic’s impact, Delta’s shares have almost halved in the year to date, giving it a market capitalization of around $19 billion.

Delta ended the second quarter with $15.7 billion in liquidity through a combination of government and other financing, and as of July, had been considering whether to take an additional $4.7 billion federal loan.