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By clicking “I AGREE”, you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s information that becomes accessible to you (the “Information”). References herein to “Moody’s” include Moody’s Corporation. and each of its subsidiaries and affiliates..

 

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Rating Action:

Moody's affirms Delta Air Lines' Baa3 senior unsecured rating, changes outlook to positive

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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MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY100,000 to approximately JPY550,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​
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