S&P May Cut British Airways Into Junk Territory

January 28, 2009

Standard & Poor's said on Tuesday it may cut British Airways' credit rating into junk territory after the British carrier warned a weak economy and the pound's decline would see it fall into the red in 2008-09.

S&P said it may cut BA's corporate credit rating from "BBB-minus," the lowest investment grade, and its senior unsecured debt from "BB-plus," one step below investment grade.

"BA's financial profile is likely to come under increased pressure from the challenging trading environment and a subsequent slowdown in passenger traffic growth," S&P said in a statement.

"In addition, foreign exchange differences will not only affect operating revenues, they will also have a significant negative impact on the group's debt levels," the rating agency said.

British Airways on Monday said it would make an operating loss of GBP150 million pounds (USD$207 million) in the year to end-March, compared to a guidance repeated earlier this month for a small operating profit.