S&P cuts Alaska Air certificates

S&P said it downgraded Alaska Air Group Inc.’s 2020-1 class B enhanced equipment trust certificates to BBB- from BBB following a review prompted by its May 26, publication of new criteria for rating such issues.

The agency affirmed the group’s BB- issuer rating, changed the outlook to positive from negative and withdrew the ratings at Alaska Airlines Inc. at the issuer’s request.

“We expect Alaska to benefit from the recent increase in demand for domestic travel, given its predominantly domestic route network. Domestic leisure travel in the U.S. has rebounded as a result of the increasing level of vaccinations and easing of travel restrictions brought on by the Covid-19 pandemic,” S&P said in a press release.

The outlook reflects the view, the agency said, that Alaska's operating and financial performance will improve in the second half of 2021 and into 2022, aided by an ongoing recovery in demand for domestic air travel.

“We expect FFO to debt to remain in the mid-30% area through 2022. We forecast FOCF to debt in the mid-20% area in 2021 before it turns negative in 2022 due to high capital spending requirements,” S&P said.

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