On Tuesday, AirTran Holdings Incorporated (AAI) announced its intention to offer 9 million shares in an underwritten registered public offering.

Along with this, it also intends to offer $75,000,000 aggregate principal amount of notes. The closing of the notes offering is expected to be concurrent with the closing of the share offering.

The net proceeds from both the offering will be utilized for general corporate purposes, which may include additions to working capital, capital expenditures, or the retirement of debt.

AirTran’s ratio of earnings to fixed charge remains low; it has remained in the 1.0X-1.3X range since 2004. For the year ended Dec. 31, 2008, earnings were insufficient to cover fixed charges by $308.5 million.

On Sept. 26, 2009, the company amended the processing agreement with its largest credit card processor to extend the expiration date of the agreement from Dec. 31, 2009, to Dec. 31, 2010. It also signed an agreement with the Bank of Utah to extend the expiration date of its combined letter of credit and revolving line of credit to the end of 2010. These measures were taken to improve the company’s liquidity and financial flexibility.

At Sept. 30, 2009, cash, cash equivalents and short-term investments totaled approximately $408.2 million, excluding approximately $55.2 million in restricted cash.

Morgan Stanley & Co. Incorporated and Raymond James & Associates will act as underwriters for the issue.

This move by AirTran is yet another instance of increased airline industry access to financial markets. With an improved outlook on airline industry fundamentals, major airlines such as AMR Corporation (AMR), Delta Air Lines Incorporated (DAL), US Airways Group Incorporated (LCC) and United Airlines (UAUA) have recently announced financing deals.

Zacks Investment Research
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