Source: Reuters Author: Dena Aubin 07/09/2009
Subject Concerned: Airlines Aviation Fuel
On Jul. 9, Moody's Investors Service cut its rating on British Airways deeper into junk status, citing weakening travel demand and higher fuel prices.
The outlook is stable, meaning another rating action is not expected over the next 12 to 18 months.
"While the company expects fuel costs to be lower than last year, we do not believe that this will be sufficient to offset the negative impact on profits of lower demand," Moody's said in a statement.
Moody's cut British Airways by one notch to Ba3, the third-highest junk rating, from Ba2.
Hurt by global recession, the world's airlines lost more than US$3 billion in the first quarter of 2009, airline lobby International Air Transport Association (IATA) said last week.
Airlines have been conserving cash or merging to survive, while a bounce in oil prices looks likely to delay profits when demand recovers.
Moody's said that a recovery in air travel demand will be slow, particularly in the premium segment.
British Airways' rating is supported by its solid liquidity, but it could come under pressure if there are no signs of a general industry recovery in coming quarters, or if concerns develop about liquidity, Moody's said.