S&P slashes Western Global Airlines

S&P said it lowered its ratings on Western Global Airlines Inc.’s issuer rating to CCC from B- and its $400 million of senior unsecured notes to CCC- from CCC+. The 5 recovery rating on the notes is unchanged.

“We expect WGA's performance will be negatively affected by the challenging operating environment in 2023 and beyond due to weaker global macroeconomic conditions and increasing air cargo capacity. We expect the constraints limiting air cargo supply (that were present from 2020 through early-2022) will ease significantly over the next few quarters (with the process already underway since late-2022) as a gradual increase in international air travel leads to the return of more passenger widebody belly capacity,” S&P said in a press release.

The agency noted WGA recorded significant negative free cash flow for the first nine months of 2022 but forecasts “positive FOCF in 2023 (due to lower capex and an improved working capital position), we believe its limited liquidity cushion may be insufficient if its operating performance weakens for a few quarters.”

The outlook is negative.

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