Fitch upgrades DAE rating to BBB; outlook stable

Fitch Ratings has upgraded Dubai Aerospace Enterprise (DAE) long-term issuer default rating to BBB from BBB-. The outlook on its long-term issuer default rating is stable. It has also upgraded DAE Funding LLC's senior unsecured debt rating and DAE Sukuk's sukuk programme and debt ratings to BBB from BBB-. Speaking to Airline Economics, DAE CEO Firoz Tarapore said: ""The recent upgrade by Fitch Ratings to BBB is a recognition of DAE's continued efforts to strategically strengthen our franchise. During the pandemic, not only were we profitable in every quarter but also grew our fleet count by nearly 40%, including the acquisition of an orderbook with near-term delivery positions."" Fitch said the rating upgrade was driven by the ""likelihood of support"" from the Investment Corporation of Dubai (ICD) after DAE became fully owned by the ICD in 2019, as well as ""DAE's role within the strategically important aviation sector in Dubai and the UAE."" Fitch added in a statement: ""Prior to this rating action Fitch had considered the possibility of support from ICD more implicitly, within the individual key rating drivers, and this had contributed to the previous positive outlook."" The rating also reflects DAE's improved corporate governance, including its ""repayment and cessation of related-party lending and a broader and more balanced board of directors since Fitch first rated DAE in 2019."" Fitch's rating of DAE's standalone credit profile also reflected the company's position as one of the largest aircraft lessors globally, as well as its ""sound fleet profile, healthy lessee diversification, robust risk controls, contained leverage, sound liquidity and a largely unsecured funding profile."" DAE's owned, managed, and committed fleet totalled 489 aircraft at the end of this year's first financial period, valued at around $18bn. Its owned fleet totalled 314 aircraft and were valued at around $11.1bn. Its sound fleet profile was reflected in its rating. In addition, Fitch cited one of its factors that contributed to the upgraded rating was DAE's sound liquidity. Its liquidity was around $5bn at the end of March 2024, up from $4.1bn at the end of last year. Its net debt-to-equity ratio was 2.47:1 times at the end of the quarter, compared to 2.53:1 times at the end of last year. In addition, its total revenues were up 9% year-on-year in the period to $343.6 million. Tarapore added: ""Our BBB senior unsecured rating will further improve our access to capital markets and enhance our ability to offer even more competitive pricing to our airline customer relationships."" DAE's rating by Moody's is Baa3 with its outlook positive and BBB+ by KBRA. It is not rated by S&P Global Ratings.