Fitch downgrades Aeroflot

Fitch Ratings said it downgraded PJSC Aeroflot - Russian Airlines’ (Aeroflot) long-term foreign-currency issuer default rating to B+ from BB- and placed it on Rating Watch negative.

The downgrade reflects expectations of weakening credit metrics for the company through 2017, principally due to ruble de-valuation and lower yields, Fitch said.

The negative watch reflects the expected negative impact of Aeroflot’s announced acquisition of a majority stake in OJSC Transaero Airlines on its already stretched financial profile, at least in the short-term, the agency said.

The agency said it will review Aeroflot’s ability to restructure Transaero’s debt and operations.

Aeroflot’s business profile is supported by the company’s fairly diversified route network, favorable hub position, competitive cost structure and its strong market position in the domestic market, Fitch said.

But the company’s credit metrics significantly deteriorated in 2014 and are expected to remain weak through 2017, the agency said.

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