United returns to JFK, ups state loan to $7.16bn

United Airlines (UA, Chicago O’Hare) has announced its intention to return to New York JFK on February 1, 2021, with non-stop services to the US West Coast, in an aggressive strategic move that will pit it against American Airlines (AA, Dallas/Fort Worth), Delta Air Lines (DL, Atlanta Hartsfield Jackson), and JetBlue Airways (B6, New York JFK), which consider the airport their hub. United already services New York’s other main airports, New York Newark and New York La Guardia. The move would be good news for more transcontinental choice as US travellers returned to the skies, commented Kevin O’Toole, Chairman of the Port Authority of New York and New Jersey. “United Airlines’ return to JFK Airport is a clear sign that air travel is returning in New York and across the region,” agreed Rick Cotton, Executive Director of the Port Authority of New York and New Jersey. After a five-year absence from JFK, United will fly twice daily rotations to Los Angeles Int’l, and San Francisco, CA using reconfigured B767-300(ER)s featuring an extended premium cabin. United also announced new nonstop flights to Florida from seven Midwest and North-East cities, offering direct connections to top warm weather and leisure destinations. Meanwhile, the US Treasury has granted the airline a term loan facility increase of USD1.99 billion to USD7.16 billion in terms of a restatement agreement signed between United Airlines (as borrower), parent United Airlines Holdings (as guarantor), and the US Treasury (as lender) on November 9. It amends an original credit agreement for a USD5.17 billion term loan facility dated September 28, 2020. The obligations of United under the amended credit agreement are secured by liens on certain route authorities, certain related slots, and gate leaseholds, and other related assets. The amended credit agreement provides that the term loan facility commitments will automatically be further increased by up to USD340 million if United pledges certain B777-300(ER)s and certain flight simulators, and satisfies certain other conditions, before December 4, 2020, (or such later date approved by the Treasury). If United completes such an increase in full, the aggregate amount available under the term loan facility will be USD7.5 billion. In connection with its original credit agreement, United also entered into a warrant agreement with the Treasury on September 28, 2020, in terms of which it will issue to the Treasury warrants for the purchase of up to 22.73 million shares of common stock, assuming United borrows the USD7.16 billion term loan facility in full. Alternatively, it will issue warrants for the purchase of up to 23.81 million common stock shares if it borrows the USD7.5 billion term loan facility in full. Warrants will have a strike price of USD31.50 per share.