If an airline, hotel brand, or cruise line offered a "travel bond", would you buy it?
 

It's kind of a popular topic in local restaurant circles: the idea is that you give the restaurant cashflow right now in exchange for dining after they reopen. e.g., Buy a $100 gift card today, use it for $125 at some point in the future. Generally speaking, the gift card would spend like cash - no restrictions - but you're placing a bet that the restaurant won't entirely cease to exist during the quarantine period. (The ones I've seen are this simple mechanic - they don't behave like actual investment bonds.)

Seeing all of the airlines bellyaching about giving refunds, which is awful rich given how they've had billions of dollars in profits for several years now and showered their executive with huge bonuses, it makes me wonder if they wouldn't offer the same concept.

Would you take them up on such an offer? What kind of premium would you want to get "paid" to take the offer?

My take:
- I'd only consider any offer if it truly spent like cash. No expiration date, no minimum fares, no restrictions on what may be bought (tickets, upgrades, etc. - whatever they sell directly).
- Among US airlines, I'd consider it for WN and maybe DL at a 20-25% payback.
- I'd have to think long and hard about whether I'd take any offer from AA or UA, simply because I flat out do not trust them to behave ethically, ever.
- Probably wouldn't buy a ULCC at all. They might legit go Ch.7 if this lasts too long.
- Would consider Marriott, Hyatt, or Hilton at a 20-25% payback provided it works at any property.
- Wouldn't consider any offer from a cruise line. At this point, that's just straight-up gambling betting on who survives this and who doesn't.

So far, airlines hope that liberal refund/change rules for the coming months will have the effect they need - getting people to book some summer/fall/winter travel. But they may need even more than that, so something like this wouldn't seem that far-fetched.

Simple answer: no.
Nuanced answer: EFF no.

No.

When your carrier issues bonds, but those if you think that giving cash to a commercial air carrier is a good investment. At least the bonds will be priced to market. Likely not a great investment just now, but one heck of a lot better than forking over cash so that you can become an unsecured creditor in Chapter 11.

No chance. The whole industry is at risk. Even if you get to “the other side” of this with your bond’s value intact, where’s the incentive for airlines which have already issued millions and millions of pounds’ worth of vouchers, and now have ‘bond’ liabilities on their books too to price competitively? They’ve got you locked in, and can devalue your holding by increasing fares at will.

Never in hell. The airlines in particular have abrogated trust over and over again -- reneging on commitments, changing terms, making the Contract of Carriage increasingly one-sided, and exploiting customers opportunistically. A bond requires trust. I would not trust an airline to sort my socks, let alone honor bond issuance terms.

In this crisis the airlines suffer from a real disadvantage some other industries don't: they have virtually no store of public goodwill built up. I would buy a bond from my local steakhouse, my local barber shop, my cleaning service, etc. I trust them. I don't trust the airlines.

The corporate bond market already exists, no need to reinvent the wheel.

​(You're a generous person, there is no way in hell I would price this premium at 25%.)

https://buynowstaylater.com/ (not advocating this website... and its just a page, need to contact/email the individual hotels directly)

Note that UA and DL are talking about pre-selling miles to banks in what is a sort of panic bond issue equivalent, but with a faithless, floating-value currency.

Depends on the airline. For a national flag carrier such as Air Canada I might. The government here isn't going to let it go under but the bond would have to spend like cash and be of a sufficient premium to make it worthwhile.

Hotel chains less likely but maybe. I'm already "invested" in a couple of pre-booked stays for later this year, am not seeking refunds and keeping my fingers crossed

Cruise lines? Not on your life. I expect that segment of the travel market to be devastated.

I’ve no idea what the Canadian government may or may not do, but more generally be aware that there are different ways of keeping a national flag carrier afloat.... one is letting it go into administration and then buying it out of administration with unsecured creditors (voucher holders) screwed along the way...

Air Canada went into administration in 2003 and it possibly could happen again. Post 2008, government loans kept the airline afloat and helped it get through a pension liability issue. I suspect this time will be more like '09 than '03.

Perhaps for another thread, but the decrease in cruise demand almost makes me want to book a fall 2020 trip to one of the cities otherwise ruined when those giant petri dishes disgorge their hordes in the town. Dubrovnik, perhaps?

+1

Kind of like buying a gift card now for less than its face value. I like that concept. Spend $80 and get $100 worth of product in the future. They get their guaranteed money now, and provide the product in the future.

Except that you neither know whether they will still exist to provide you that product, or how much they will charge for it (and therefore what your gift card is worth in relative terms).