Moody’s: Cashflow risk to airlines

Pádraig Hoare

Airlines could feel cashflow and liquidity pressures in the event of a no-deal Brexit, credit rating firm Moody’s has said.

A Moody’s report said a no-deal Brexit would be credit negative for European airlines as they stand to lose a lot of the rights enabling them access to other countries via EU regulations.

The airlines most exposed to a no-deal Brexit include Ryanair, British Airways, EasyJet, Thomas Cook, TUI and Virgin Atlantic, the report said. Despite the outlook on a no-deal Brexit, Moody’s said its central view is that the UK and the EU will reach a deal.

Author of the report, Moody’s senior credit officer Jeanine Arnold said: “It could compound an airline’s ability to increase yields, raise load factors and generate cost efficiencies in what is still a competitive market environment in Europe.

“Ultimately it could lead to cashflow and liquidity pressures.”

However, the strong liquidity of Ryanair, British Airways and EasyJet should enable them to weather the financial impact of a no-deal Brexit, even if flights are disrupted for an extended period, the report said.

Norwegian Air Shuttle is less exposed to the risks Moody’s has identified, but its very weak liquidity leaves it more sensitive to flight disruption or macroeconomic factors, it said.

Moody’s said if risks materialise, financial implications could be severe in the short term, but modest in the long term. Even in a no-deal scenario, agreements are imperative as the airline industry lacks fallback legislation comparable to World Trade Organisation rules, it said.