JetBlue Airways is not letting its poor credit rating stop it from taking on debt. Bloomberg reports that the company is preparing to take over $2.75 billion in new commitments while continuing to pursue its course aborted merger with Spirit Airlines.
Neither rating agencies nor stock investors seem particularly happy with the maneuver. The company’s shares fell by more than 20% on Monday, and the The Wall Street Journal reported that both S&P and Moody’s have downgraded JetBlue’s credit rating even further into the speculative “junk bond” range.
Revenue from the frequent flyer program serves as collateral for part of the money. At an investment conference in March, where she described the previous Spirit cooperation as “three years of distraction,” CEO Ursula Hurley said her company was keep an eye on the money pot as a potential financing multiplier.
“We have $10 billion in unencumbered assets, and about half of that $10 billion is our loyalty program,” she said at the time. “We are one of the few airlines that has not yet maxed out the loyalty program.”
Airlines make money from their frequent flyers by selling their points to other companies, such as hotels and credit card companies. JetBlue made more than $400 million from selling points last year. according to the annual report.
