United Airlines pledges to increase government loan to Boeing 777-300ERs

United Airlines has decided to use certain Boeing 777-300ERs to increase its term credit facility with the United States Department of the Treasury. The airline, which first borrowed under the loan in September, can now access up to $ 7.5 billion from the facility.

United Airlines is pledging certain Boeing 777-300ERs in order to be able to increase its loan facility. Photo: Vincenzo Pace | JFKJets.com

United promise 777-300ER

In November, United Airlines had the choice of the Treasury Department. If it pledged certain Boeing 777-300ER, it could increase its total amount available under the loan facility to $ 7.5 billion. Of this amount, $ 7.16 billion was, in total, guaranteed by certain road authorities, certain slot and gate concessions and other assets.

However, if United pledged certain Boeing 777-300ERs, flight simulators and other unspecified conditions, it could increase its loan facility by an additional $ 340 million.

December 8, United and the Treasury Department amended the loan agreement to include an additional $ 331 million after the carrier pledged certain Boeing 777-300ER aircraft and related flight simulators and assets.

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United Boeing 777-300ER
United Airlines has increased its amount available under the facility by more than $ 300 million. Photo: United Airlines

United’s total amount under the loan facility is $ 7.491 billion. From which the carrier has borrowed 520 million dollars. As of December 8, the airline had not borrowed any additional amounts. All loans borrowed under the term loan facility will be due on September 28, 2025. The interest rate is variable and is set at the London Interbank Offer Rate (LIBOR) plus a margin of 3.00. 00% per year.

A more conventional form of financing

Obtaining an aircraft owned for a loan is not new to the world of air travel. It is one of the building blocks of the industry when an airline needs to raise money. Without the government loan, United would have gone into the private market to secure financing by pledging these planes and other associated collateral. United Airlines did not say how many Boeing 777-300ERs it pledged under that loan.

United Airlines was the launch customer for the Boeing 777 and currently operates -200 and -300 aircraft. Photo: Getty Images

Earlier this year, United Airlines also took a less conventional route to raise funds. It leveraged its billion-dollar loyalty program, which helped solidify the airline’s cash flow over the summer.

United still burns money

Mid-November, against a backdrop of a slowdown in reservations and a increasing number of cancellations, United Airlines reduced some capacity in the fourth quarter, but maintained an expected average daily cash consumption of $ 15-20 million per day, plus $ 10 million in average debt principal payments and severance pay per day.

Having access to all that funding doesn’t mean United has to shoulder all of that debt. Instead, he has the option to do so if he needs to. And, right now, having the option is much better than not having it at all.

The Boeing 777-300ER

The Boeing 777-300ERs are among United’s newest aircraft. On board, these planes can accommodate up to 350 passengers. This includes 60 in Polaris business class, 24 in Premium Plus (premium economy), 62 more in economy with more legroom and finally 204 in standard economy. United at 22 Boeing 777-300ER, and the first of these planes only arrived about three years ago.

United Polaris
There are 60 Polaris seats aboard the 777-300ER. Photo: United Airlines

United typically flies the 777-300ERs on some of its most prominent routes, such as to Shanghai, Tel Aviv, Hong Kong, New Delhi, and more. These planes have more Polaris business class seats than any other plane in United’s fleet.

Do you think United Airlines made the right decision in increasing their funds available under the government loan facility? Let us know in the comments!

About Aldrich Stanley

Aldrich Stanley

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