Fitch cuts airlines

Fitch Ratings said it downgraded North American airlines after reviewing most of the airlines in the region.

“The depth of the decline in traffic related to the pandemic is causing substantial cash outflows for airlines in the near-term. Looking past the worst of the crisis, it has become increasingly likely that the economic impact of the pandemic will cause a much slower than previously anticipated rebound in air traffic,” Fitch said in a press release. The outlook is negative.

Fitch downgraded Southwest Airlines Co. to BBB+ from A-. “The downgrade reflects our view that additional borrowing to shore up near-term liquidity reduces financial flexibility by such a degree that the A category rating is no longer appropriate,” Fitch said.

Delta Air Lines Inc. was downgraded to BB+ from BBB-. “Though Delta remains a stronger credit than its network peers, debt raised to sustain liquidity through the pandemic will drive credit metrics outside of a range supportive of investment-grade ratings at least through 2021 and likely into 2022,” Fitch said.

Fitch trimmed American Airlines Inc. by one notch to B and the ratings remain on rating watch negative. This follows Fitch’s downgrade of American to B+ from BB- on March 20. Fitch said it expects the company will have enough liquidity and access to capital to manage through the year; however, significant added borrowing and the likelihood of a slow recovery make it likely the company’s credit metrics will remain well outside of prior expectations at least through 2021 or 2022.

Fitch downgraded United Airlines Holdings Inc. to BB- from BB “Fitch’s forecasts indicate that United should be able manage through the worst of the pandemic without raising additional debt, assuming that it obtains government grants under the CARES Act,” the agency said.

Fitch lowered Alaska Air Group Inc. to BB+ from BBB. “Fitch views Alaska, along with Southwest and Delta, to be one of the better-positioned US carriers to weather the expected downturn,” the agency said.

Fitch downgraded JetBlue Airways Corp. to BB from BB+. “The downgrade is primarily prompted by expectations for a slower recovery in demand such that credit metrics will be modestly outside of levels that support a BB+ rating at least through 2021,” Fitch said.

Fitch trimmed Spirit Airlines, Inc. to BB- from BB. “The downgrade is based on our revised forecasts, which anticipate additional borrowing and slower expected recovery will push leverage outside of our negative rating guidelines at least through 2021,” the agency said.

Fitch affirmed Air Canada’s issuer default rating at BB. “Given our expectation for a slower recovery in demand, we expect Air Canada’s credit metrics will fall outside levels that would support a BB rating during 2020 before returning to supportive levels around the end of 2021,” Fitch said.

Fitch cut Hawaiian Airlines Inc. to B+ from BB-. “The downgrade reflects credit metrics that are likely to stay outside of Fitch’s downgrade sensitives through YE 2021. Fitch is also concerned that Hawaiian may experience a slower recovery than some airlines from the prolonged economic effects of the pandemic given the premium/non-essential nature of Hawaiian vacations,” Fitch said.

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