British Airways debt cut to junk; EasyJet to sell some planes to keep flying through the Covid-19 crisis
Shares in Aer Lingus-and British-Airways-owner IAG were little changed even as British Airways became the first major European carrier to lose its investment grade status amid the Covid-19 pandemic after Fitch cut its credit rating one notch to junk.
The downgrade shows the huge financial stress airlines are facing amid the Covid-19 crisis and comes as EasyJet -- Ryanair’s main rival -- said it will sell some of its planes to ensure it can get through the storm.
British Airways is unlikely to recover its end-2019 capacity level until 2023, according to Fitch’s baseline forecast.
British Airways has said that it will grant temporary leave to more than 30,000 employees, around 80% of its staff, through April and May.
S&P and Moody’s also cut BA’s ratings recently to the lowest level of investment grade. IAG shares have lost 55% of their value from a year ago.
Other airlines, including Lufthansa, could similarly see its debt downgraded to junk in the coming weeks, after S&P and Moody’s cut their ratings in March.
EasyJet boosted its cash reserves to ride out the pandemic, saying it now has sufficient resources to see it through the end of the year.
EasyJet, which is Britain’s biggest discount airline, said it had borrowed £400m (€505m) against its jet fleet, and may raise £550m more from selling planes to leasing firms.
EasyJet’s latest moves to shore up cash come against the backdrop of an air-transport industry in free fall and a side-battle with founder and top shareholder Stelios Haji-Ioannou over how to handle the crisis.
Its shares fell 2% in the session and are now almost 50% down from a year ago.
Ryanair shares were down 1% and have now slid 22% in the past year.
