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Continental divide
01 November 2006
American Airlines and Continental Airlines have shown
that bond investors like spare parts and engine bonds. So why has no one else followed?
Read more:
American Airlines; Continental Airlines
In 2002 Continental Airlines closed the first spare parts enhanced equipment trust certificate (EETC). The deal was a success, despite closing during tough capital markets, at a time when many aircraft EETCs were downgraded. American Airlines then successfully closed an unwrapped spare parts financing deal in 2003. Continental Airlines bounced back by closing its first wrapped deal in June 2006, obtaining the lowest-ever pricing on an EETC when it closed at Libor plus 35 basis points.
All three deals have proved that investors like the assets. All three deals have performed well. So why has not every US airline closed a spares deal yet?
Liquidity, liquidity, liquidity
One reason is that airlines are not short of financing offers. The market is...
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