American Airlines announced on Monday that it will raise $1.14 billion through the sale of aircraft-backed securities. The proceeds will be used to purchase new aircraft, refinance existing planes, and support general corporate purposes.
The offering consists of two debt securities. The larger tranche is a $905 million enhanced equipment trust certificate with an average life of 7.7 years and a market yield of approximately 5.625%. The other tranche amounts to $235.8 million and has a shorter duration. Both bonds are secured by 32 new and current aircraft, including 11 Boeing 737 MAX 8 and 6 Airbus A321XLR planes.
Although American Airlines itself carries a B+ credit rating, which is four notches below investment grade, the longer-term bond backed by its aircraft is expected to receive an A rating from S&P. The enhanced equipment trust certificate structure enables airlines with below-investment-grade credit ratings to access the investment-grade bond market by providing aircraft collateral. Goldman Sachs, MUFG, and Morgan Stanley are acting as lead underwriters for the bond issuance.
The decision to tap the bond market coincides with a significant rise in industry fuel costs. Due to ongoing geopolitical conflicts driving up oil prices, jet fuel now accounts for approximately one-quarter of airline operating costs. The company previously warned that its annual fuel bill is projected to increase by more than $4 billion this year, with prices expected to remain elevated at around $4 per gallon. Consequently, American Airlines has revised downward its full-year 2026 profit forecast and cautioned that it may report an annual loss.
Despite pressure from fuel expenses, the company's first-quarter earnings report indicated strong operational performance. Quarterly revenue reached a record $13.91 billion, an increase of 10.8% year-over-year. The adjusted loss per share was $0.40, better than the market expectation of a $0.47 loss. Jefferies raised its price target for the stock from $12 to $13, while BMO Capital increased its target to $13.50.
American Airlines' full-year 2026 earnings per share guidance ranges from a loss of $0.40 to a profit of $1.10. The company plans to expand its capacity by approximately 4%, which is about double the industry's overall growth rate.
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