Philip Morris International Inc
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Consumer Staples : Tobacco | Large Cap Value
Company profile

Philip Morris International Inc. is a holding company. The Company is engaged in the manufacture and sale of cigarettes, other tobacco products and other nicotine-containing products in markets outside of the United States. Its segments include European Union (EU); Eastern Europe, Middle East & Africa (EEMA); Asia, and Latin America & Canada. The Company's portfolio of international and local brands is led by Marlboro. Its mid-price brands are L&M, Lark, Merit, Muratti and Philip Morris. Its other international brands include Bond Street, Chesterfield, Next and Red & White. The Company also owns various local cigarette brands, such as Dji Sam Soe, Sampoerna and U Mild in Indonesia; Champion, Fortune and Jackpot in the Philippines; Apollo-Soyuz and Optima in Russia; Morven Gold in Pakistan; Boston in Colombia; Belmont, Canadian Classics and Number 7 in Canada; f6 in Germany; Delicados in Mexico; Assos in Greece, and Petra in the Czech Republic and Slovakia.

Closing Price
$74.45
Day's Change
-0.41 (-0.55%)
Bid
--
Ask
--
B/A Size
--
Day's High
75.37
Day's Low
74.31
Volume
(Below Average)
Volume:
3,823,431

10-day average volume:
4,637,869
3,823,431

UPDATE: Airlines are using frequent flyer programs to sell debt. Here's how it works

11:26 am ET September 28, 2020 (MarketWatch)
Print

By Sunny Oh

Loyalty programs are highly profitable for airlines

Airlines are looking to an unusual piece of collateral to obtain new funds -- frequent flyer programs.

Airlines have pledged all sorts of assets such as airport gates and routes before, but this is the first time they have used their profitable mileage programs as collateral for bondholders.

"It doesn't have much of a track record," said Gary Pzegeo, head of fixed income at CIBC Private Wealth Management, in an interview.

Airlines are borrowing as much money as they can to see them through the slump in demand for travel during COVID-19 pandemic.

Delta Airlines (https://www.marketwatch.com/story/delta-air-lines-and-skymiles-ip-to-issue-bonds-and-enter-term-loan-for-aggregate-65-billion-2020-09-14)DAL (#phrase-company?ref=COMPANY%7CDAL;onlineSignificance=passing-mention) announced Monday it would borrow $6.5 billion of funds, backed by its Skymiles loyalty platform. And in June, United Airlines (UAL) contemplated the idea of using their frequent flyer programs to secure government loans.

So how do frequent flyer programs churn out so much cash?

In essence, miles are sold to credit card companies who offer them as part of their reward programs to their customers. The revenues earned from selling the miles are much higher than the cost of any flight travel redeemed by passengers,

"The customer doesn't realize the margins are quite high," said Cliff Andrus, fixed income portfolio manager at Voya Investment Management, in an interview.

In a June filing, United Airlines valued (https://ir.united.com/node/23771/html) their MileagePlus loyalty program at $21.9 billion which is around double the total market capitalization of the company itself.

Even with reduced demand for air travel, the mileage programs still hold their value. On one hand, the number of customers redeeming their miles have shrunk as air travel has collapsed this year, but on the other hand consumer spending via credit card has largely held up, ensuring a steady flow of cash into airlines' coffers.

"You're going out to spend money on your credit card, whether or not you're flying," said Andrus.

Some investors say this represents a desperate move by airlines that are looking for any assets that they can pledge as collateral to borrow new funds.

The worry is that pledging away the mileage programs as collateral could undermine the the amount of money existing lenders would usually recover from their initial investment if the company enters bankruptcy proceedings, Tom Graff, head of fixed income at Brown Advisory, told MarketWatch.

"Some lenders will do better, and some lenders will do worse," he said.

But for now, investors see the more important issue as airlines having enough cash on hand to get through to the other side of the coronavirus pandemic.

Prices for other Delta bonds did not take a hit after it announced the new debt issue on Monday, suggesting other bondholders feel it's a case where the more cash, the better.

Delta's six-year bond set to mature in 2026 traded at 105.2 cents on the dollar on Wednesday, up slightly from 103.9 cents at the end of last week, according to data provided by MarketAxess.

In other markets, the Dow Jones Industrial Average and the Nasdaq Composite were falling on Thursday. Meanwhile, the 10-year Treasury note yield was down to 0.663%.

-Sunny Oh; 415-439-6400; AskNewswires@dowjones.com

(END) Dow Jones Newswires

September 28, 2020 11:26 ET (15:26 GMT)

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