Fitch: Positive Credit & Operating Outlook May Lead to Upgrades for U.S. Airlines in 2015

CHICAGO—(BUSINESS WIRE)—A solid domestic travel market, ongoing capacity discipline, lower fuel prices, and incremental debt reduction should lead to improving credit profiles for the U.S. airline industry, according to Fitch Ratings.

Fitch has Positive Outlooks on four of its eight publicly traded North American airlines and expects to take some positive rating actions in 2015. Fitch’s overall credit and sector outlooks are positive.

Fitch expects further moderate capacity growth in 2015, with system-wide available seat miles (ASMs) up 2-4% and domestic ASMs near the high end of that range. The recent drops in oil and fuel prices will likely be a major factor in airline profitability, and Fitch expects room for further operating margin expansion in 2015 following notable improvements in 2014.

With sizable upcoming deliveries, several airlines are potential candidates to enter the EETC market next year, and Fitch believes there is potential for non-U.S. airlines to enter the market in 2015. Low interest rates could prompt more unsecured issuance, though improving cash flow from lower fuel prices may lessen the need for the industry to tap the debt markets.

Fitch remains cautious toward shareholder focused cash returns given the industry’s capital-intensive and cyclicality, although credit impacts from these programs are not expected to be material in the near term.

The full ‘2015 Outlook: U.S. Airlines’ is available at ‘www.fitchratings.com’.

Additional information is available at ‘www.fitchratings.com’.

Applicable Criteria and Related Research: 2015 Outlook: North American Airlines (Airline Sector Continues Its Ascent)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=834349