14th Jun 2019 09:18
(Alliance News) - S&P Global Ratings on Thursday upgraded the credit rating for British Airways-owner International Consolidated Airlines Group SA to BBB amid a "solid" financial performance.
The credit analyst boosted the credit rating for the FTSE 100-listed airline to BBB with a Stable rating, from BBB- previously.
S&P Credit Analyst Izabela Listowska explained the move follows a "solid" earnings before interest, tax, depreciation and amortisation performance which is expected to continue in financial 2020. Passenger traffic growth and non-fuel costs savings are offsetting higher fuel prices and weak yields. for IAG
In 2018, adjusted Ebitda at IAG widened to EUR5.37 billion from EUR5.02 billion the year prior, as revenue rose to EUR24.41 billion from EUR22.88 billion.
During May, IAG - which also operates the Iberia, Vueling and Aer Lingus airlines - saw reported passenger numbers up 4.1% year-on-year to 10.4 million from 10.0 million in May 2018. In 2019 to date, passenger numbers are up 5.9% to 44.6 million from 42.1 million in 2018.
"These improvements, combined with sufficient operating cash flows to accommodate investment in new planes and largely stable adjusted debt of EUR8.1 billion, resulted in better credit measures, and enhanced IAG's financial flexibility to weather any unforeseen operational setbacks or the next potential industry downturn," Listowska explained.
For 2019, S&P forecasts adjusted Ebitda to fall "moderately" to between EUR5.3 billion and EUR5.4 billion. In 2020, this is expected to grow again to between EUR5.8 billion and EUR5.9 billion.
S&P could consider a further credit rating upgrade should IAG achieve "strong and resilient profitability" whilst expanding adjusted Ebitda towards EUR6.5 billion.
"Although we realize that the airline industry is exposed to cyclical supply-and-demand conditions, volatile fuel prices and foreign exchange rates, and likely further network disruptions, we believe that IAG will turn its EBITDA strength into lasting value," Listowska added.
"This will be, most importantly, because of the company's ability to continue lowering the unit cost to counterbalance the industry's volatility, while protecting its strategic position in the profitable premium traffic segment," Listowska continued.
Shares in IAG were trading flat at 466.90 pence in London on Friday.
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