American Airlines Group's credit rating has been upgraded to B+ by S&P Global.
The rating agency said that the upgrade action followed the airline's "sharp improvement" in its credit measures throughout the first half of 2023 led by its strong rebound in earnings and robust free cash flow generation. S&P also pointed to American's improved refinancing prospects since the risk of a US recession has been reduced risk due to the strengthening US economy and the continued high passenger travel demand.
"We assume the company will generate free operating cash flow (FOCF) of over $2 billion in both 2023 and 2024 and improve its balance sheet from debt reduction. The company is on track to maintain credit measures that are strong for the issuer credit rating (ICR) over the next two years," S&P said in its rating announcement.
S&P forecasts the airline's funds from operations to debt at 17% and adjusted debt to Ebitda of just over 4x in 2023. "These measures are close to our previous forecasts. However, we now believe that they can be sustained and remain well above our previous upside rating threshold (FFO to debt of over 10%)," S&P explained.
Although S&P states that American's credit profile has not yet full recovered from the impact of the global pandemic, "it is getting close" the rating agency declared, adding that despite its "still significant" debt load - including $7.5bn in maturities due in 2025 - American's refinancing prospects have improved.