No. of Recommendations: 2

Anyone want to comment on today's announcement from American Airlines?

I think this might make AMR more profitable and thus make their bonds a little less risky. But it's hard to tell this far in advance. Besides, for AMR this is probably only tweaking their direct expenses by a small amount.

I think the more interesting (and unspoken) item involves AMR's Dry Lease partner - International Lease Finance Corporation, a division of AIG - which AIG has had no success selling. (ILFC has a great deal of corporate debt in the market.)

If this deal also means that AMR has leases on nearly 460 ILFC planes expiring soon, losing those leases could sorely impact ILFC's bottom line. Admittedly ILFC has thousands of planes under contract, but idling even 10% of its fleet could have serious consequences to the company's bottom line.

Has Moody's taken any of this into account in their rating or outlook for ILFC bonds?

No, I don't own ILFC bonds. I did take a serious look at buying them at a steep discount in 2009. Had ILFC not been owned by AIG, I might have gone there. But at the time, I didn't think the government's bailout would necessarily save ILFC, especially since I thought ILFC would get sold or spun off in an IPO and their debt would likely go with them.

- Joel
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