Question

Considering the effect that the pandemic may have on some businesses and larger companies, would your decision to lend to American Airlines change when considering the current situation?

American Airlines' biggest liability in their operating income is its contributions to pension plans. It contributed (in millions) $286, $475, and $1,230 in 2017, 2018, and 2019 respectively. Even with these large sums contributed, American Airlines has stayed in the green in net cash earned from operating activities; earning inflows of cash of (in millions) $4,744, $3,533, $3,815 in 2017, 2018 and 2019 respectively.

American has not been as successful in its financing and investing activities. American has financed a lot of aircraft with long term debt. In 2018 they had a capital expenditure and aircraft purchase of $3,745 and $2,354 in the issuance of long-term debt. In 2019 they had capital expenditures and aircraft purchase of $4,268 and $3,960 in the issuance of long-term debt. American Airlines has seen outflows from financing activities of (in millions) $1,145, $1,672, $1,568 in 2017, 2018, and 2019 respectively. It also saw outflows from Investing activities of $3,636, $1,973, and $2,243.

Answer 1