The credit status of airlines

Extract

Ever since I was a young boy I have been fascinated by aviation. While a mixture of pedagogical advice and lack of mechanical aptitude steered me away from a flying career I am delighted to say that it has been almost as satisfying providing credit to the industry over the past six years since I joined Bank of America in London. It is therefore with great pleasure that I will attempt (in the august environment of this society) to clear some of the mystery that shrouds the commercial banking world’s assessment of the underlying value of an airline. At the same time I am conscious that bank finance has only been one way of funding capital equipment costs, even though it has grown disproportionately as a source of funds in the past five years. I will then, as John Prothero Thomas (of Caledonian Airways) has already anticipated, attempt to tell you why the financial community has begun to retreat into its shell when asked to stretch even more to accommodate deficient cash flows in the industry.