SKY Airline of Chile is looking to issues an overseas bond that would be convertible into shares of the airline. The US$100 million bond would enable the carrier to sustain operations through 2021 and beyond, while the company continues to seek state guarantees.
SKY has enough funds to make through 2020, in part due to the recent agreement with the pilots union, which helped cut costs. Further downsizing in staff is anticipated by the pilots' union from September 2020.
From December 2020, the airline expects to reach 50% of pre-COVID 19 capacity, and 80% by December 2021. As a result of the decline in passenger revenue versus the previous operating environment, SKY opted to seek the financing.
A state guarantee will allow the carrier to borrow under more favorable conditions, but nothing has been approved by the government as of yet. SKY is looking for enough runway to sustain operations for at least 18-24 months and enable it to come out of the downturn stronger than its competitors.
BTG Pactual was the investment bank that was awarded the mandate to seek the international financing. BTG Pactual advised the carrier to link this proposal with a future IPO of the airline in 2024, in which Paulmann Mast would continue to be the majority shareholders.
The final bond payment would be due in 2025, if secured.
The roadshow for the issuance is expected to occur throughout August 2020. Should it not be successful, the airline and it advisors will consider other options, such as private financing in Chile, or new credit lines with banks.
SKY is valued between $150-600 million, with a debt of $800 million – 95% derived from aircraft financing.
As for the fleet, SKY is still on track for its A320XLR deliveries in 2023, enabling the airline to launch flights from Santiago to Miami, or Lima to New York and Los Angeles.
The airline reduced its fleet from 26 to 17 planes due the the current crisis and also postponed the delivery of aircraft for six to 12 months, with only two planes due in 2020.