And as long as we are talking ratings, Fitch rates American Airlines creditworthiness as BB-. This is their rating scale:
BREAKING DOWN Fitch Ratings
Along with
Moody's and
Standard & Poor's (S&P’s), Fitch is one of the top three credit rating agencies in the world. The Fitch rating system is very similar to S&P's in that they both use a letter system.
The Fitch rating system is as follows:
Investment grade- AAA: companies of exceptionally high quality (established, with consistent cash flows)
- AA: still high quality; slightly more risk than AAA
- A: low default risk; slightly more vulnerable to business or economic factors
- BBB: low expectation of default; business or economic factors could adversely affect the company
Non-investment grade
- BB: elevated vulnerability to default risk, more susceptible to adverse shifts in business or economic conditions; still financially flexibility
- B: degrading financial situation; highly speculative
- CCC: real possibility of default
- CC: default is a strong probability
- C: default or default-like process has begun
- RD: issuer has defaulted on a payment
- D: defaulted
and this is their most recent assessment of American Airlines:
Fitch Ratings - Chicago - 25 November 2019:
Fitch Ratings has affirmed American Airlines Group Inc.'s (American) Long-Term Issuer Default Rating (IDR) at 'BB-'. The ratings also apply to American's primary operating subsidiary American Airlines, Inc. In addition, Fitch has taken various rating actions on American's EETCs as detailed at the end of this release.
American Airlines Group Inc.'s 'BB-' rating is supported by the company's market position as one of the largest airlines in the world, a dominant position in key hubs and prospects for improving FCF and declining leverage over Fitch's forecast period. However, Fitch considers some of American's credit metrics to be weak for the rating. Credit metrics have been pressured over the past two years by a combination of one-time events including labor issues and the 737 MAX grounding, and by rising labor costs and by an intensely competitive environment. Fitch expects metrics to improve over the next 1-2 years as declining capital expenditures allow for debt reduction and as various revenue initiatives continue to take hold.
American's adjusted leverage at Sept. 30, 2019 was 5.1x, up from 4.9x at the same point in 2018, which Fitch considers high for the rating. EBIT margins declined in the LTM period to 8.2% from 8.5%. Fitch previously stated that American's metrics would need to improve in order to avoid a negative rating action. The Stable Rating Outlook reflects the one-time nature of some of American's performance in 2019. However, failure to see material improvement in leverage and profitability metrics in 2020 is likely to lead to a negative rating action.