British Airways Lands in Junk Territory After Fitch Cuts Rating

(Bloomberg) -- British Airways has become the first major European carrier to lose its investment grade status amid the Covid-19 pandemic after Fitch cut its credit rating one notch.

The flagship British company, controlled by the International Consolidated Airlines Group, is unlikely to recover its end-2019 capacity level until 2023, according to Fitch’s baseline forecast.

The ratings agency also put the company on negative outlook, reflecting the uncertainty around the air travel industry. Its report cited “the heightened risk for British Airways to adjust its operational base, investment program and capital structure in a fast-evolving environment.”

The airline’s $506.2 million bonds due 2024 dropped one cent on the dollar to 86 cents on Thursday, 20% down from a 107 cents peak in March 11.

The airline said that it will furlough more than 30,000 employees, around 80% of its staff, through April and May as most of its jets remain grounded. Fitch expects the company to have enough liquidity to sustain remaining operations in the second quarter and to start to recover from the second half of the year.

S&P and Moody’s also cut BA’s ratings recently to the lowest level of investment grade. Both agencies also put the company on negative watch ahead of potential further downgrades.

Other airlines, including IAG and Deutsche Lufthansa AG, could similarly see its debt downgraded to junk in the coming weeks, after S&P and Moody’s cut their ratings in March.

©2020 Bloomberg L.P.