If you would like to ask our webinar guest speakers from WS Blue Whale Growth Fund, Taseko Mines, Kavango Resources and CQS Natural Resources fund a question please submit them here.

Less Ads, More Data, More Tools Register for FREE

Pin to quick picksInternational Airlines Share News (IAG)

Share Price Information for International Airlines (IAG)

London Stock Exchange
Share Price is delayed by 15 minutes
Get Live Data
Share Price: 181.20
Bid: 181.95
Ask: 182.10
Change: -1.60 (-0.88%)
Spread: 0.15 (0.082%)
Open: 184.45
High: 186.00
Low: 181.20
Prev. Close: 182.80
IAG Live PriceLast checked at -

Watchlists are a member only feature

Login to your account

Alerts are a premium feature

Login to your account

Moody's Signals Rating Cuts For European Airlines Amid Virus Spread

Tue, 17th Mar 2020 15:40

(Alliance News) - Moody's Investor Service on Tuesday signalled a series of downgrades for European airlines as they struggle to combat the spread of Covid-19.

The credit ratings agency has downgraded easyJet PLC to Baa2 from Baa1 and Deutsche Lufthansa AG to Ba1 from Baa3, with Lufthansa on review for another downgrade. Moody's has placed all ratings from both airlines on review for downgrade.

Additionally, the investors service has placed International Consolidated Airlines Group SA's ratings on review for downgrade.

"The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets," Moody's said.

It continued: "The combined credit effects of these developments are unprecedented. The passenger airline sector has been one of the sectors most significantly affected by the shock given its exposure to travel restrictions and sensitivity to consumer demand and sentiment."

Moody's said its action reflects the harm the coronavirus will have on easyJet, Lufthansa and IAG.

Moody's base case assumptions are that the coronavirus pandemic will lead to a period of severe cuts in passenger traffic over at least the next three months with partial or full flight cancellations and aircraft groundings, with all regions affected globally.

The base case assumes there is a gradual recovery in passenger volumes starting in the third quarter. However, there are high risks, Moody's said, of more challenging downside scenarios and the severity and duration of the pandemic and travel restrictions is uncertain.

"easyJet has been particularly exposed to the early stages of the coronavirus outbreak in Europe due to its exposure to Italy, which represented around 20% of passenger volumes in 2019. Moody's expects travel restrictions to worsen globally over the coming weeks leading to full or partial groundings across the company's network," the ratings agency said.

Moody's does not expect easyJet to benefit materially in 2020 from the lower oil price because it has hedged around 68% of its expected fuel costs for fiscal 2020, ending 30 September 2020, through swaps at a jet fuel price of USD655 per metric tonne, compared to the current price of around USD420 per metric tonne.

With significant cancellations and capacity cuts easyJet is likely to be fully or over-hedged in the next quarter.

Turning to Lufthansa, Moody's is worried about the weaknesses in its credit profile, leaving it "vulnerable" to the outbreak continuing to spread.

"Lufthansa has felt the negative impact from declining passenger traffic earlier than other European competitors due its strong long haul network to China and the APAC region," Moody's said.

The spreading of the virus beyond APAC has dented traffic on most of Lufthansa's network forcing the issuer to announce capacity cuts of up to 25% on February 29 and up to 50% on March 6 to react to sharply declining revenue passenger kilometres and forward bookings for the next few weeks.

Moody's added: "The sharp decline in demand comes at a time when Lufthansa has no headroom under its current rating category."

Moody's expects the Lufthansa's adjusted gross debt/Ebitda to be around 3.5x at fiscal year-end 2019, offering "no breathing space" against a downgrade trigger of 3.5x.

"As a consequence of the negative free cash flow generation, leverage metrics will be materially below the requirements for the previous rating category going forward at least in 2020," Moody's said.

Moody's noted Lufthansa is currently focusing on managing its way through this very volatile market environment by reducing costs as much as possible and by shoring up its liquidity profile.

As for IAG, Moody's assumes around a 50% reduction in the British Airways-parent passenger traffic in the second quarter and an 18% fall for the full year, whilst also modelling significantly deeper downside cases including a full fleet grounding during the course of the second quarter.

"IAG has responded rapidly to the crisis by cancelling flights to China, other Asian routes, Italy, the US and other regions and instigated cost and cash preservation measures. The travel ban announced by the US on non-US citizens from 26 European nations will further affect many of IAG's routes.," Moody's said.

Moody's expects travel restrictions to deepen and the extension of the travel ban to journeys from the UK to the US will severely affect routes of British Airways - which is also under review for a downgrade - which represented around 68% of IAG's adjusted operating profit in 2019.

Similar to easyJet, Moody's does not expect IAG to benefit materially in 2020 from the lower oil price.

Moody's also anticipates that the airline industry will require continued and further support from regulators, national governments and labour representatives to alleviate pressures on slot allocations, provide indirect or direct financial support and manage airlines' cost bases.

An extension of slot alleviation beyond the current provisions to June 2020 in Europe is also likely to be important, Moody's added.

Shares in easyJet were trading 8.1% lower in London on Tuesday afternoon at 579.80 pence each. IAG was 4.3% lower at 244.70p. In Frankfurt, Lufthansa was 5.1% higher at EUR9.04.

By Paul McGowan; paulmcgowan@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

More News
5 Apr 2024 15:22

London close: Stocks finish lower as US payrolls top forecasts

(Sharecast News) - London markets closed lower on Friday amid a backdrop of heightened investor caution, following robust US job data for March, hawkish remarks from Federal Reserve officials, and escalating tensions in the Middle East.

Read more
28 Mar 2024 16:49

UK Border Force officers at Heathrow airport to take strike action

LONDON, March 28 (Reuters) - More than 600 UK Border Force officers at Heathrow Airport, Britain's busiest hub, will take strike action for four days from April 11 in a dispute over working conditions, the PCS trade union said on Thursday.

Read more
27 Mar 2024 10:28

JPMorgan puts IAG on 'positive catalyst watch' ahead of Q1 results

(Sharecast News) - JPMorgan Cazenove placed shares of BA and Iberia owner IAG on 'positive catalyst watch' on Wednesday ahead of first-quarter results and following minor changes to estimates published yesterday.

Read more
27 Mar 2024 09:40

LONDON BROKER RATINGS: Sainsbury's, Petershill Partners upped to 'buy'

(Alliance News) - The following London-listed shares received analyst recommendations Wednesday morning and Tuesday:

Read more
21 Mar 2024 16:33

London close: Stocks rise as BoE keeps rates on hold

(Sharecast News) - London markets closed higher on Thursday, sustaining gains after the Bank of England adhered to expectations by maintaining interest rates at a 16-year high.

Read more
21 Mar 2024 09:27

LONDON BROKER RATINGS: UBS cuts Entain; RBC raises IAG

(Alliance News) - The following London-listed shares received analyst recommendations Thursday morning:

Read more
21 Mar 2024 09:09

RBC Capital upgrades IAG to 'outperform'

(Sharecast News) - RBC Capital Markets upgraded BA and Iberia owner IAG on Thursday to 'outperform' from 'sector perform' and lifted the price target to 220p from 200p.

Read more
21 Mar 2024 07:52

LONDON BRIEFING: Stocks called up thanks to New York rally

(Alliance News) - Stocks in London are to open higher on Thursday, after a global equity market rally following the latest interest rate call from the US Federal Reserve.

Read more
15 Mar 2024 15:07

London close: Stocks finish mixed after Reckitt compo blow

(Sharecast News) - London's equity markets finished in a mixed state at the end of a quiet trading session on Friday, after another hotter-than-expected US inflation reading overnight.

Read more
6 Mar 2024 15:02

London close: Stocks finish higher after Hunt's Spring Budget

(Sharecast News) - London's stock markets closed in positive territory on Wednesday, as investors absorbed the Chancellor's Spring Budget announcement of a 2p reduction in National Insurance.

Read more
6 Mar 2024 14:05

Tax rise outlined in UK budget for air passengers in premium cabins

(Alliance News) - Airline passengers travelling in premium cabins will be hit by a UK tax hike.

Read more
6 Mar 2024 09:07

LONDON BROKER RATINGS: JPMorgan raises IAG; Jefferies likes Experian

(Alliance News) - The following London-listed shares received analyst recommendations Wednesday morning:

Read more
6 Mar 2024 08:45

IAG flies higher after double upgrade to 'overweight' by JPMorgan

(Sharecast News) - BA and Iberia owner IAG flew higher on Wednesday as JPMorgan Cazenove double upgraded the shares to 'overweight' from 'underweight' and lifted the price target to €2.50 from €1.45.

Read more
6 Mar 2024 07:45

LONDON BRIEFING: ConvaTec profit doubles; DS smith trades in line

(Alliance News) - Stocks are called to open higher on Wednesday, with focus in the UK on Wednesday's Spring budget.

Read more
1 Mar 2024 09:14

LONDON BROKER RATINGS: Numis cuts St James's Place to 'hold'

(Alliance News) - The following London-listed shares received analyst recommendations Friday morning:

Read more

Login to your account

Don't have an account? Click here to register.

Quickpicks are a member only feature

Login to your account

Don't have an account? Click here to register.