(Bloomberg) — Fitch Ratings raised Delta Air Lines Inc. out of junk territory, making the carrier a so-called rising star with a second investment-grade rating.
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Delta was upgraded a notch to BBB- on Tuesday, with Fitch saying the carrier’s credit metrics “improved considerably after the pandemic.” It reduced gross debt and operating leases by some $11 billion the past three years.
The company was downgraded to junk by Fitch and S&P Global Ratings in 2020, when Covid-19 wreaked havoc on the travel industry. S&P still has Delta at its highest junk rating, while Moody’s Ratings has the airline at Baa3, its lowest rung of investment grade.
The upgrade officially marks Delta as a blue-chip company once again, making its debt eligible for major high-grade indexes, including Bloomberg’s. Today’s ratings action affects about $27 billion of gross debt and lease liabilities, according to Fitch.
Fitch expects the airline’s leverage to trend to the mid-to-low 2x range over the next year to 18 months, further supporting the upgrade, analyst Joseph Rohlena wrote in a statement. Delta has been focusing on reducing its debt levels ever since its ratings were lowered to junk during the pandemic, and has cut over $6 billion of debt in the last year and a half, according to Fitch.
The Atlanta-based company is also expected to deliver “solid” results this year as it’s “well-positioned to generate healthy operating margins and cash flows,” Rohlena wrote.
With the move, Delta becomes the first among its competitors to make it back into investment-grade indexes. United Airlines Holdings Inc. only has one high-grade rating from Moody’s and American Airlines Group Inc. is still junk rated by all three ratings assessors.
(Updates to add more context beginning in the fourth paragraph.)
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