Moody's See No Immediate Volcano Impact on European Airlines' Credit Ratings

 |  Includes: AFLYY, BAIRY, DLAKY
by: Research Recap

Moody’s has indicated that at this time its ratings for European airlines and related structured transactions are not affected by the flight cancellations and airport closures resulting from volcano ashes emanating from the volcano in Iceland. However, this assessment could change if conditions do not improve in the coming weeks.

… we believe that for the most part the rated European airlines retain sufficient buffers to weather this disruption.

Nevertheless, we also believe that the financial impact will likely delay the expected recovery in metrics that is often factored into our current ratings. British Airways (B1 stable outlook)has estimated the daily loss in revenues to amount to c.GBP15-20 million, while noting that it retains in excess of GBP2 billion in cash and credit lines available.

Air France-KLM has reported a daily loss of EUR35 million as a result of the disruptions; and while not specifying numeric losses, Lufthansa and Iberia have also been affected by substantial flight cancellations.

SAS (Caa1 CFR, under review for possible downgrade) has estimated a daily loss of SEK50-90 million in earnings, which includes alternative travel arrangements for its passengers, while its liquidity status will depend on the successful implementation of its planned rights issue.