Fitch Ratings has downgraded WestJet to ‘B-’ from ‘B’, warning that elevated jet fuel prices will prolong pressure on profitability and delay improvement in the airline’s credit profile.
The agency also lowered ratings on WestJet’s senior secured and loyalty programme debt to ‘B+’, while maintaining a Stable outlook.
Fitch said the downgrade reflects expectations that fuel costs will keep the airline’s metrics outside previous rating thresholds through 2026. Adjusted leverage stood at 6.8x at the end of 2025, above Fitch’s negative sensitivity, while EBITDAR fixed-charge coverage was 0.9x. Leverage is expected to rise further before improving in 2027, assuming fuel prices ease.
Fuel remains the key pressure point, accounting for 22% of operating costs in 2025. While WestJet is expected to offset some of the increase through higher fares amid robust demand, Fitch cautioned that sustained high oil prices or weaker demand could further compress margins.
The agency noted that WestJet entered the current fuel shock with thinner margins than peers, generating near break-even operating margins in 2025 compared with around 9% for industry leaders such as Delta Air Lines. Although one-off operational and integration issues from 2025 are expected to fade, Fitch said any improvement will depend on demand holding up as fares rise.
Despite the downgrade, Fitch highlighted stabilising factors including C$1.6 billion of cash and full availability under a $510 million revolving credit facility, as well as limited near-term maturities. Aircraft deliveries are expected to be financed through sale-leasebacks, limiting capital expenditure.
WestJet’s position in Canada’s concentrated market, where it holds about 30% share, and its cost advantage relative to Air Canada were also cited as strengths.
However, peer comparisons underline the gap in credit quality. WestJet’s ‘B-’ rating sits four notches below Air Canada’s ‘BB’, reflecting higher leverage, smaller scale and more limited financial flexibility. Fitch expects Air Canada’s leverage to trend to the mid-3x range, compared with the mid-5x to upper-4x range for WestJet.
Relative to US carriers, WestJet is rated one notch above JetBlue Airways (CCC+), though Fitch noted JetBlue benefits from greater scale and a larger pool of unencumbered assets.
The Stable outlook reflects expectations that strong demand and pricing power will support gradual margin recovery, but Fitch warned that prolonged high fuel costs or a downturn in traffic could trigger further negative rating pressure.