Approximately $772 million of new certificates will be secured by 25 A321ceos about two years old on average
New York, October 29, 2019 -- Moody's Investors Service ("Moody's") has assigned ratings to JetBlue
Airways Corp.'s ("JetBlue") Pass Through Certificates,
Series 2019-1 that the company announced earlier today: $588.685
million Class AA with a legal final maturity of November 15, 2033
at Aa3 and $183.570 million Class A with a legal final maturity
of November 15, 2029 at A2 (together, "the Certificates").
The final scheduled distribution dates precede the respective legal final
maturity dates by 18 months. The Certificates' proceeds will finance
25 Airbus A321-200ceo (current engine option) narrow-body
aircraft delivered new to JetBlue between February 2017 and December 2018.
JetBlue's Ba1 Corporate Family Rating ("CFR") and stable outlook
are unaffected by today's rating assignments.
RATINGS RATIONALE
The ratings reflect the credit quality of JetBlue; the typical benefits
of EETCs, including the applicability of Section 1110, cross-default
and cross-collateralization of the equipment notes; 18-month
liquidity facilities provided by Credit Agricole CIB, New York Branch;
cross-subordination pursuant to the Intercreditor Agreement;
and Moody's belief that each of the aircraft models will remain important
to JetBlue's network during the transaction's 12.5-year
term. Moody's believes having 40% of the company's
A321ceo fleet in the collateral supports a very high likelihood that JetBlue
would affirm this transaction if it declared bankruptcy.
Moody's estimates of the peak loan-to values (LTV) for the Class
AA and Class A (about 57% and 67%, respectively,
before priority claims for repossession and remarketing costs and of liquidity
providers) support the rating of each class. The amortization profile
of the Class AA is upward sloping, with Moody's projected
LTV steady at about 50% through 2027, then increasing to
57% at the final scheduled payment date in 2032. The amortization
profile of the Class A is about flat at 65% over its eight year
term. The projected LTV's in the prospectus supplement have
downward sloping curves from inception to maturity; from 46%
to 32% over the life for the Class AA and from 61% to 51%
for the Class A. Moody's uses a 5% annual rate of
decline and a 1% inflation rate when projecting the current market
value of the aircraft. This compares to the 3% rate and
appraisers' base values used in the prospectus supplement and accounts
for the differences in projected LTVs. Moody's estimates the aggregate
market value of the 25 aircraft at about $1.207 billion
at the transaction's issuance date, about $910 million in
November 2024 and about $400 million at scheduled maturity in May
2032. These values compare to about $1.266 billion,
$1.065 billion and $763 million, respectively,
of maintenance-adjusted base values disclosed in the offering memorandum.
Moody's value projection implies an average value of $16
million for a 14 year-old A321ceo at the transaction's scheduled
maturity in 2032; the prospectus supplement implies an average value
of $30.5 million at maturity. These compare to a
range of about $15 million to $22 million according to certain
aircraft appraisers other than those used in the transaction. Moody's
anticipates that the market values of current engine technology models
(e.g.: Airbus A320ceo family, Boeing 737NG family)
will experience greater pressure through the 2020s as compared to through
the 2010s because of the gradual changeover in the global fleet to new
engine technology models (A320neo and 737MAX).
The A321ceo will remain important to JetBlue's fleet over the transaction's
life, along with the A321neo. There are 63 A321ceos (25%
of total) in the fleet today. The 25 in the transaction are the
youngest of the type. 120 A320ceos and 60 Embraer E190s round out
the total current fleet of 253 aircraft. JetBlue had 83 A321neo
aircraft on order at September 30, 2019, 23 of which will
be of the longer range versions, either the LR or XLR. These
will likely serve on trans-Atlantic routes the company plans to
offer starting in 2021 and, we believe, likely longer routes
into Latin America that have yet to be announced. There is an order
for 70 Airbus A220s, which will replace the company's Embraer
fleet. Moody's believes that a significant portion of the
typical range A321neos in the order book will replace the company's
smaller A320ceo aircraft. The 40 oldest A320s in the fleet delivered
between 1999 and 2003. Some A321s have the very popular premium
MINT cabin, which provides solid support to the company's
operating profits, as do the higher seat count, high density
A321s that do not have the MINT cabin. The high density A321s and
the coming neos will help the company lower its carbon footprint.
The higher seating density will lower emissions per passenger and per
available seat mile. According to Airbus, the neo family
will improve fuel efficiency by 20% compared to the predecessor
ceo models.
The Ba1 Corporate Family rating reflects the company's solid competitive
position in its US East Coast and transcontinental routes, anchored
in its focus cities in New York (JFK International Airport), Boston,
Fort Lauderdale, Los Angeles, Orlando and San Juan; strong
credit metrics, including Debt to EBITDA of about 1.5x at
September 30, 2019; and recurring free cash flow. The
company's relatively smaller scale and increasing competitive intensity,
particularly from Delta Air Lines at Boston's Logan Airport,
constrain the Ba1 rating. Pro forma for this EETC, Debt to
EBITDA will increase to 2x at September 30, 2019.
Changes in the EETC ratings can result from any combination of changes
in the underlying credit quality or ratings of JetBlue, Moody's
opinion of the importance of particular aircraft models to the airline's
network, or Moody's estimates of aircraft market values, which
will affect estimates of loan-to-value.
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.
The following ratings were assigned:
Assignments:
..Issuer: JetBlue Airways Corp.
....Senior Secured Enhanced Equipment Trust
2019-1 Class A, Assigned A2
....Senior Secured Enhanced Equipment Trust
2019-1 Class AA, Assigned Aa3
JetBlue Airways Corp., based in Long Island City, New
York, operates a low-cost, point-to-point
airline from its primary focus cities -- New York from John F.
Kennedy International airport, Boston, Fort Lauderdale and
Los Angeles. JetBlue serves more than 100 cities with an average
of more than 1,000 daily flights. The company reported revenue
of $8 billion in the last 12 months ended September 30, 2019.
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
