S&P Global Ratings hit British Airways (Ba) Ltd. and parent company International Consolidated Airlines Group SA with two-notch downgrades into junk status and lowered the ratings of four other major European airlines, citing bleak long-term prospects for the industry stemming from the coronavirus pandemic.
The rating agency downgraded British Airways and IAG to BB from BBB-, the lowest investment-grade rating, and assigned negative outlooks to the long-term ratings.
The long-term rating of Germany's Deutsche Lufthansa AG was lowered to BB+ from BBB- while the short-term rating was cut to B from A-3.
S&P Global Ratings lowered its long-term debt ratings on easyJet PLC to BBB- from BBB and on Air Baltic Corporation AS to B from B+. TAP Air Portugal, or TAP - Transportes Aéreos Portugueses SGPS SA, was downgraded to B- from B.
The debt watcher kept the long-term issuer credit and issue ratings of Lufthansa, EasyJet, Air Baltic and TAP Air Portugal on CreditWatch with negative implications. Lufthansa's short-term rating was removed from CreditWatch negative.
S&P Global Ratings also affirmed the long-term ratings of Türk Hava Yollari Anonim Ortakligi, or Turkish Airlines, at B, and assigned a negative outlook. The ratings of Ryanair Holdings PLC and SAS AB were maintained on CreditWatch negative.
The ratings actions followed downgrades and CreditWatch placements in March, when the coronavirus outbreak officially became a pandemic and first prompted European governments to impose travel restrictions and lockdown measures.
As a result of government measures to contain the pandemic, global and European air passenger traffic could decline by 50% and 55%, respectively, in 2020, according to S&P Global Ratings.
"[W]e don't expect air traffic to rebound to pre-pandemic levels before 2023," said the rating agency, which sees global and European passenger volumes dropping by up to 30% in 2021 compared with 2019.
Airlines' credit metrics in 2020 and 2021 would be significantly weaker than previously expected as cost-cutting and cash-conservation measures fail to fully offset their revenue shortfall, S&P Global Ratings said.
This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings.