Airline stock rally, American quotes plan to repay loans

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FORT WORTH, Texas (AP) – Airline stocks rose Monday, amid signs that the introduction of vaccines later this year could lead to a rebound in travel.

American Airlines, meanwhile, announced plans to raise $ 7.5 billion by borrowing against its frequent flyer program and using the funds to pay off a federal loan it received almost a year ago in the early days of the pandemic. The airline said the measures would not add to its overall debt. Similar moves are being made by Delta Air Lines and United Airlines.

American liquidity has improved more than expected due to federal loans and funds to cover payroll, according to Fitch Ratings – aid that was extended in December and would see further renewal the COVID-19 relief measure passed by the Senate over the weekend.

“Meanwhile, the introduction of several effective coronavirus vaccines has increased the likelihood of a significant recovery in air travel from 2021 and decreased the likelihood that Americans will continue to burn money for extended periods of time,” Fitch said.

Americans used around $ 30 million in cash every day in the fourth quarter.

However, Fitch warned that air traffic will remain low and the pace of recovery is uncertain.

Airlines have been particularly hard hit by the pandemic, and travel restrictions continue to remove most international flights, which are usually a lucrative part of their business.

However, there were signs of improvement in domestic travel. After a gloomy January, the number of passengers has increased since then. On Sunday, the Transportation Security Administration examined nearly 1.3 million people at U.S. airports. While this was a 41% decrease from the comparable day before the 2019 pandemic, it was better than the average decrease of 58% this year compared to 2019.

American Airlines shares rose 5% on Monday. United was up 7%, Southwest Airlines was up 6.4% and Delta was up 3.6%.

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