Airlines' debt crises averted, but risk lingers

— -- U.S. airlines' successful scramble to sell new debt and issue new shares has all but eliminated the near-term cash crises that some analysts had feared.

But there's still huge amounts of risk involved, and analysts say that those who've been gobbling up more than $6 billion in airline paper and shares over the last three months could discover painfully just how much if business travelers willing to pay for premium seating don't return soon.

Airline investors are "buying en masse right now," says CreditSights airline debt analyst Roger King. "But when winter rolls around, if airline fundamentals don't improve sharply, those investors may be asking themselves, 'What was I thinking?' "

In the last two months, American Airlines has made financing deals worth about $5 billion. Delta on Tuesday refinanced $1.5 billion in existing debt to push back maturity dates and borrowed an additional $600 million in cash. And analysts expect United, which has raised more than $600 million this year, to announce another debt financing soon. US Airways, which has little available collateral to use to secure more debt, is issuing $150 million in new equity.

Despite nascent signs that the broader economy may be emerging from recession, there's little evidence that a true recovery in travel, especially in the premium class, is at hand.

"The glass is only a quarter full," King says.

This summer, there were modest signs that passenger traffic had begun to pick up. But to get that, airlines had to lower prices. They offered a string of fare sales. They also made many coach seats that they used to sell at near-premium prices available at lower fares.

However, the airlines continued to see a paucity of business travelers willing to buy first- or business-class tickets. Thus, their unit revenue — a critical statistic that shows how much money they get, on average, from passengers for every available seat mile they offer — remains about 20% below what it was last year.