(Reuters) – Southwest Airlines Co (LUV.N), Ryanair Holdings Plc (RYA.I) and easyJet Plc (EZJ.L) are the only three airlines whose bonds are still rated investment grade, S&P Global Ratings said, while estimating a drop of up to 70% in global air passenger traffic for 2020.
All three are very low or low-cost carriers largely focused on leisure passengers and short-haul flying, and equipped with strong liquidity, the ratings agency said on Wednesday.
With the easing of coronavirus-led lockdowns, there are signs of a rebound in domestic travel, helping budget airlines, although passengers continue to shun international routes.
Airlines operating long-haul international flights including American Airlines (AAL.O), United Airlines (UAL.O) and Delta Air Lines (DAL.N) have been among the worst hit due to the pandemic, forcing them to raise billions of dollars in debt to support costs.
“Pre-COVID-19, just over one-third of our global airlines portfolio was rated at ‘B+’ or lower, and now this has risen to about two-thirds of the total,” S&P Global said.
The ratings agency’s forecast for 2020 global passenger traffic has worsened to a drop of between 60% and 70% from between 50% and 55% estimated at the end of May.
Almost all airlines, including the top three U.S. carriers flying international flights, remain on negative outlook or “CreditWatch negative” by S&P Global, reflecting the extremely weak and uncertain outlook for the aviation sector.
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