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I AGREE
15 Jan 2020
New York, January 15, 2020 -- Moody's Investors Service ("Moody's") affirmed its debt ratings
assigned to Delta Air Lines, Inc. ("Delta"): senior
unsecured at Baa3, senior secured bank credit facilities at Baa1,
and senior unsecured shelf at (P)Baa3. Moody's also affirmed
the ratings on all of Delta's Enhanced Equipment Trust Certificates
(EETCs). The rating outlook was changed to positive from stable.
"Moody's expects 2020 will be another strong year for Delta's
operating performance. Steady cash generation and sustaining margins
and debt-related credit metrics near current levels in light of
potential pressure on industry fundamentals from geo-political
and or global macro conditions would support a ratings upgrade,"
said Moody's Senior Vice President and lead analyst, Jonathan
Root.
The positive outlook anticipates sustained reliability of operations,
and competitive operating margin and free cash flow over the cycle.
Moody's expects little reduction of funded debt as investment in the fleet
and airport facilities increases and share repurchases remain a priority
in upcoming years. The outlook reflects Moody's expectation that
the US airlines will continue to emphasize earning acceptable returns
on invested capital, which will lead to capacity reductions and
cost management when economic growth slows.
RATINGS RATIONALE
Delta's Baa3 senior unsecured rating reflects its competitive profit margin
and leading free cash flow generation among global airlines. Delta's
business profile defined by its brand, global network, leading
airline operating performance and operating partnership model is strong.
Moody's expects the business profile will help mitigate potential pressure
on the credit profile during cyclical downturns and/or if Delta was to
continue to debt-fund investments in additional airline partnerships.
Moody's estimates debt-to-EBITDA at 2.7x on
a Moody's-adjusted basis at December 31, 2019. Adjusted
debt includes a non-standard adjustment of about $4.5
billion to capitalize variable rent leases; the leverage metric also
benefits from earnings expansion in 2019.
The ratings could be raised if Delta sustains its business profile and
leading free cash flow generation. Debt-to-EBITDA
of below 3x, Funds from Operations ("FFO") plus interest to interest
that remains above 8x and or an EBITDA margin near 20% could support
higher ratings. Keeping liquidity including cash and s.t.
investments plus availability on revolving credit facilities above $4.5
billion and cash + s.t. investments of about $2
billion could also support a ratings upgrade. The ratings could
be downgraded if share repurchases are repeatedly funded with debt,
EBITDA margin declines towards 15%, debt-to-EBITDA
is sustained above 3.25x, or FFO plus interest to interest
is sustained below 6x. Cash + s.t. investments
below $1.5 billion could lead to a ratings downgrade.
The affirmations of the EETC ratings consider the loan-to-values
of the respective transactions and Moody's views of the relative
importance of the aircraft collateral to the network.
The methodologies used in these ratings were Passenger Airline Industry
published in April 2018, and Enhanced Equipment Trust and Equipment
Trust Certificates published in July 2018. Please see the Rating
Methodologies page on www.moodys.com for a copy of these
methodologies.
Headquartered in Atlanta, Georgia, Delta and the Delta Connection
carriers offer passenger air travel services to over 300 destinations
in more than 50 countries and six continents. Delta reported $47
billion of revenue for 2019.
The following rating actions were taken:
Affirmations:
..Issuer: New York Transportation Develop.
Corp., NY
....Senior Unsecured Revenue Bonds,
Affirmed Baa3
..Issuer: Clayton County Development Authority,
GA
....Senior Unsecured Revenue Bonds,
Affirmed Baa3
..Issuer: Delta Air Lines, Inc.
....Senior Secured Bank Credit Facility,
Affirmed Baa1
....Senior Unsecured Regular Bond/Debenture,
Affirmed Baa3
....Senior Unsecured Shelf, Affirmed
(P)Baa3
....Senior Secured Enhanced Equipment Trust,
Series 2007-1 Class A, Affirmed A3
....Senior Secured Enhanced Equipment Trust,
Series 2007-1 Class B, Affirmed Baa2
....Senior Secured Enhanced Equipment Trust,
Series 2012-1 Class A, Affirmed A2
....Senior Secured Enhanced Equipment Trust,
Series 2015-1 Class A, Affirmed A1
....Senior Secured Enhanced Equipment Trust,
Series 2015-1 Class AA, Affirmed Aa2
....Senior Secured Enhanced Equipment Trust,
Series 2015-1 Class B, Affirmed Baa1
....Senior Secured Enhanced Equipment Trust,
Series 2019-1 Class A, Affirmed A3
....Senior Secured Enhanced Equipment Trust,
Series 2019-1 Class AA, Affirmed Aa3
..Issuer: Delta Air Lines, Inc. (Old)
(debts assumed by Delta Air Lines, Inc.)
....Senior Secured Enhanced Equipment Trust,
Series 2002-1 Class G1, Affirmed Baa1
....Underlying Senior Secured Enhanced Equipment
Trust, Series 2002-1 Class G1, Affirmed Baa1
..Issuer: Northwest Airlines, Inc. (debts
assumed by Delta Air Lines, Inc.)
....Senior Secured Enhanced Equipment Trust,
Series 2002-1 Class G2, Affirmed Baa1
....Underlying Senior Secured Enhanced Equipment
Trust, Series 2002-1 Class G2, Affirmed Baa1
Outlook Actions:
..Issuer: Delta Air Lines, Inc.
....Outlook, Changed To Positive From
Stable
REGULATORY DISCLOSURES
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Jonathan Root, CFA
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Russell Solomon
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
No Related Data.
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