The low cost business model is best placed to whether the COVID 19 pandemic’s impact on airlines’ balance sheets, according to S&P Global Ratings, whose latest analyst report leaves just three carriers at investment grade; Southwest, Ryanair and easyJet.
The three short-haul, leisure focussed carriers have a business model suited to the expected recovery trajectory for air travel S&P Global said in its report which was pessimistic over the medium-term outlook for the aviation industry.
S&P Global revised its forecast of future passenger levels which suggested a full rebound in numbers may not occur until after 2024.
“The International Air Transport Association notes that in the six months following the 9-11 attacks - previously considered the most severe aviation crisis - air passenger traffic measured in revenue passenger-kilometers declined by 12%, far less than the 60%-70% drop we forecast for 2020,” S&P analysts said in the report.
S&P Global downgraded easyJet, from BBB+ to BBB giving it parity with Southwest. Both carriers were placed on negative watch, as was BBB rated Ryanair.
The ratings agency said in its report that before the impact of COVID 19, just over one-third of its global airlines portfolio was rated at ‘B+’ or lower, a figure which has now shot up to roughly two thirds.
In contrast to the regional focussed LCCs, airlines flying international routes all remained on negative outlook or credit watch negative.