S&P Global Ratings downgraded United Airlines Holdings Inc. to B+ from BB-, saying that the company is likely to generate a significant cash flow deficit this year due to a steep decline in airline bookings as a result of the COVID-19 pandemic.

The action covers all ratings of United Airlines, including the issuer credit rating. S&P Global Ratings also removed the airline from CreditWatch and gave it a negative outlook.

The rating agency expects the U.S. flag carrier to record adjusted negative EBITDA of at least $2 billion in 2020 compared with positive EBITDA of $8 billion a year ago. The airline is projected to return to positive EBITDA of at least $4 billion in 2021.

United Airlines' efforts to cut capacity and associated costs and benefits are likely to be more than offset by much weaker traffic and revenues, the rating agency said. It noted that while passenger traffic has started to pick up, the slow and uneven recovery will likely continue into 2021.

S&P Global Ratings could lower United Airlines' rating over the next 12 months if it sees a prolonged or weaker-than-expected recovery, leading to continued cash flow burn.

KEY RATING DRIVERS

Delta's Corporate Rating: Fitch downgraded Delta's Long-Term Issuer Default Rating (IDR) to 'BB+' from 'BBB-' on April 10. The Rating Outlook is Negative. Although Delta remains a stronger credit than its network peers, debt raised to sustain liquidity through the pandemic will drive credit metrics outside of a range supportive of investment-grade ratings at least through 2021 and likely into 2022.

Rising Debt Balances: Delta has raised a material amount of debt, including the proposed issuance, which will weigh on its balance sheet, and prolong the time necessary to delever coming out of the coronavirus crisis. Debt raised to date, including the company's $5 billion secured transactions issued in April, the debt component of the PSP program within the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and today's proposed unsecured issuance, are materially above the amounts incorporated into Fitch's April 2020 forecast. Fitch expects that Delta's total debt balance at YE 2020 may be roughly double the balance at YE 2019. The increase in debt is partly offset by higher expected liquidity balances. Fitch expects the company to end the year with a substantial amount of liquidity, even in a harsh stress scenario where demand remains depressed through the end of the year. Delta also has certain debt maturities in late 2020 and early 2021, and shoring up liquidity to manage maturities would be credit neutral.

Given Delta's rising debt balance, Fitch views the company's headroom within the 'BB+' rating as diminished, and future ratings downgrades are possible should recovery prove slower than Fitch's expectations.

Shares of American Airlines Group Inc. AAL, -1.63% rallied 6.2% in afternoon trading, even as the air carrier's credit rating was cut to a peer-group low of B- from B at S&P Global Ratings. The credit rating agency said the outlook on the rating, which is now six notches deep into speculative grade, or "junk" territory, remains negative. S&P said it's also maintaining its assessment of liquidity at "less than adequate," given the expectation of a "substantially negative level of cash generation" over the next 12 months. "We expect American to generate a substantial cash flow deficit in 2020 due to the impact of the coronavirus, but to return to positive cash flow generation in 2021," S&P said. "While the company is reducing capacity and some associated costs, and benefits from the steep decline in oil prices, we expect these to continue to be more than offset by much weaker traffic." Meanwhile, S&P rates the credit of United Airlines Holdings Inc. UAL, -0.76% at BB-, Delta Air Lines Inc. DAL, -0.52% at BB, Southwest Airlines Co. LUV, -0.74% at an investment grade level of BBB and JetBlue Airways Corp. JBLU, +1.24% at BB-.

New York, September 01, 2020 -- Moody's Investors Service ("Moody's") assigned first time ratings to Spirit Airlines, Inc. ("Spirit" or "the company"): B1 corporate family rating, B1-PD probability of default rating and SGL-2 speculative grade liquidity. The ratings outlook for Spirit is negative. Moody's also assigned a Ba3 rating to the senior secured notes due 2025 ("Notes") that Spirit announced on August 31, 2020.