Moody’s Weighs Airline Downgrades Amid Plunge in Travel Demand

(Bloomberg) -- Moody’s Investors Service is taking aim at airlines, placing multiple carriers on review for downgrades as the industry faces the sharpest downturn since at least the 9/11 terrorist attacks.

Moody said in a statement Tuesday that it’s considering cutting Delta Air Lines Inc. to junk. The carrier currently has a Baa3 rating, the lowest investment-grade rank. The ratings company cited concerns that the virus will significantly curtail domestic and global demand for air travel through at least June.

“The rapid and widening spread of the coronavirus outbreak, the deteriorating global economic outlook, falling oil prices and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets,” analyst Jonathan Root wrote in a report. “The combined credit effects of these developments are unprecedented.”

Moody’s also cut Southwest Airlines Co. by one notch to Baa1, or three steps above junk, from A3 earlier. It said it’s considering cutting the Dallas-based carrier further.

The credit grader is also weighing cuts to JetBlue Airways Corp. and Hawaiian Holdings Inc. Both of those carriers already have high-yield ratings.

“JetBlue is left vulnerable to shifts in market sentiment in these unprecedented operating conditions, and the company remains vulnerable to the outbreak continuing to spread,” Moody’s said in a separate report.

Moody’s assumes that domestic industry capacity in the U.S. is cut by 50% in the second quarter and by 25% in the third quarter compared to the respective quarters last year, the report said.

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