Moody's Cuts British Airways' Rating

Moody's Investors Service on Thursday cut its rating on British Airways deeper into junk territory, citing weaker profits caused by higher fuel costs and lower demand.

While British Airways has said it expects its fuel costs to decline, the benefits will be tempered by ongoing weak demand, Moody's said in a statement.

British Airways, Europe's third-biggest airline by revenue, has been suffering from a sharp downturn in air travel, especially on its core London-New York business routes.

Last week it slumped to a record loss and cancelled its dividend for the year, adding that tough market conditions made it impossible to give guidance for the current period.

Moody's cut British Airways rating by one notch to Ba2, the second-highest junk rating, from Ba1. Moody's outlook is negative, meaning the airline could be downgraded again over the next 12 to 18 months.