S&P delves into the sore of IAG. The credit rating agency has lowered its rating from BB to BBB- and its outlook from stable to negative. “It is taking action but it will be insufficient,” the entity threatens in its latest report on the airline conglomerate.
The agency acknowledges that IAG “is taking steps to mitigate the collapse of air travel demand in recent months, but we do not anticipate that this will be enough to fully offset the slump in revenue.”
“We believe that the coronavirus may result a collapse of passenger air traffic of up to 50% in 2020 and that the recovery will last until 2023 ”, predicts S&P in its report. For this exercise, the agency anticipates that IAG’s Ebitda will enter negative territory.
“This, compounded by working capital requirements, which could be material due to potentially higher reimbursements or disorderly travel reserves, will result in significantly negative operating free cash flows and accumulation of debt,” continues S&P.
S&P warns IAG that its debt will double this year to 15 billion euros. The cancellation of the dividend and the reduction of the ‘capex’ “they will only compensate in a moderate way the increase of the adjusted debt”, it states. As a result, the agency also revises its assessment of IAG financing risk from ‘intermediate’ to ‘aggressive’.
For 2021, S&P does foresee an improvement in the financial reduction of the airline consortium and an adjusted Ebitda of between 3,000 and 3,500 million euros. Despite all this, these figures will continue to place it below the levels registered in 2019, before the crisis. “The low visibility on the evolution of the pandemic and the recession trends suggest that our forecasts are subject to significant risks,” the agency concludes.