Moody's Investors Service has upgraded Air New Zealand's credit rating by one notch from Baa3 to Baa2, with a stable outlook.
Moody's changed its approach capitalising operating leases which led to a reduction in Air NZ's adjusted debt, and anticipates lower jet fuel prices and strong demand will underpin the airline's earnings over the next 12 to 24 months.
"The upgrade also reflects Air New Zealand's strong operating performance of the last 12 to 24 months, and our expectations that the company's capacity growth and strong cost control measures will lead to improving margins for the carrier over the next 12 to 18 months," Moody's senior credit officer Matthew Moore said.
"Moody's expects operating and cost improvements to result in Ebitda (earnings before interest, tax, depreciation and amortisation) margins improving to around 25 per cent versus the around 22 per cent achieved for the last 12 months to December 2014.