JetBlue’s debt downgraded deeper into junk territory by Fitch

/ / News

Fitch Ratings on Thursday downgraded JetBlue Airways Corp.’s debt one notch deeper into high-yield bonds, to BB- from BB. A “recovery in air traffic will be slower than previously anticipated,” hampering JetBlue and other airlines’ efforts to drum up business until COVID-19 cases decrease or until treatment or a vaccine against the virus become available. JetBlue’s cash burn is likely to “remain material well into 2021,” Fitch said. The ratings agency also worried about the airline’s going deeper into debt, which helped it with liquidity but puts pressure on the airline’s debt metrics in the longer term, it said. Airlines have been “proactive” in cutting capacity as demand has lagged, Fitch said. As capacity increases, so will costs, “and JetBlue will not see the same types of cost savings that some larger carriers will see from things like fleet retirements and management headcount reduction,” the ratings agency said. “However, JetBlue is starting from a lower cost base, which Fitch believes puts the company in a better position to recover from the downturn.” Air-travel demand recovered some from April’s trough, but the pace of recovery slowed as reported cases began to rise again in June. “Fitch expects traffic levels to remain anemic until case levels improve substantially or until more effective treatments or a vaccine become widely available,” it said. Shares of JetBlue edged higher in the extended session Thursday after ending the regular trading day up 3.7%.
Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit MarketWatch.com for more information on this news.