Airlines are no doubt between a rock and a hard place given the effects of the coronavirus pandemic, but a healthy infusion of cash could help—unfortunately, some companies like United Airlines are finding that raising enough capital is a challenge in and of itself. Analytics company Trefis is forecasting that United Airlines will have to tap into more government-subsidized loans in order to stay afloat.
“After the failure to raise $2.25 billion from a corporate bond issue, Trefis expects the company to tap into the $4.5 billion in additional loans available to it under the Loan Program of the CARES Act. Notably, the company has also entered into a sale-leaseback deal with Bank of China Aviation for 22 aircraft after raising $1.1 billion from an equity offering in April,” a Forbes report noted.
In the article, Trefis “highlights the airline’s operational performance during the first quarter and the series of transactions it has undertaken to strengthen its balance sheet. Our interactive dashboard on United Airlines Expenses compares the trends in the company’s key expense categories over the past few years and provides a reference for the company’s operating expense for the year.”
With the coronavirus outbreak, the number of travelers taking to the skies certainly saw a marked decrease, but the latest stimulus package should help the US Global Jets ETF (NYSEArca: JETS) take-off. JETS seeks to track the performance of the U.S. Global Jets Index, which is composed of the exchange-listed common stock (or depository receipts) of U.S. and international passenger airlines, aircraft manufacturers, airports, and terminal services companies across the globe.
High Yield Bond ETF Options
Just because United Airlines can’t get a bond offering out there doesn’t mean ETF investors can’t get any high yield action. As airlines look to bond offerings, investors looking to add high yield bond exposure to their ETF portfolios can look at the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and the SPDR Bloomberg Barclays High Yield Bond ETF (JNK).
Investors contemplating another high yield option can take a look at the Goldman Sachs Access High Yield Corporate Bond ETF (GHYB). GHYB seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the FTSE Goldman Sachs High Yield Corporate Bond Index.
The fund seeks to achieve its investment objective by investing at least 80% of its assets (exclusive of collateral held from securities lending) in securities included in its underlying index. The index is a rules-based index that is designed to measure the performance of high yield corporate bonds denominated in U.S. dollars that meet certain liquidity and fundamental screening criteria.
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