Livvy, "debt" covers a multitude of things. What matters is what
Kind of debt it is. Is it credit card (17% paid by the month) or long term debt like a thirty year mortgage fixed at 5%? You don't want to pay off that sort of debt.
Airlines generate simply huge cash flows, look at the fuel bill for example. As a result they need huge amounts of working capital which I'm pretty sure the three billion covers.
The standard Bain and company trick was to take a company private, strip out all the cash in management fees, dividends and god knows what other instruments. They then find a banker greedy and stupid enough to lend the company money to replace the cash usually by offering really high rates. They then sell their shares to some wood duck and walk away. The company may very well fold under the weight of debt servicing costs but by then the culprits are long gone.
To put that another way, think of buying a Rolls Royce, pulling the engine out, selling it for $$$$$ and replacing it with a Hyundai four cylinder engine from a wrecker. You then sell the car again as a Rolls Royce. Yes, bankers are that stupid.
Last edited by Sunfish; 14th Dec 2012 at 21:43.