Fitch Affirms Ratings for British Airways 2013-1 Class A and Class B Certificates

CHICAGO--()--Fitch Ratings has affirmed the ratings for British Airways Pass Through Trusts Series 2013-1 as follows:

--Class A certificates at 'A';

--Class B certificates at 'BBB'.

KEY RATING DRIVERS

The A-tranche rating is primarily driven by a top-down analysis which evaluates the level of overcollateralization and likely recovery in a stress scenario. In the time since the previous rating action, values for the collateral aircraft have not deviated materially from Fitch's prior expectations.

Asset values for the 777-300ER (25.5% of portfolio value) and the A320-200s (20% of portfolio value) have declined slightly faster than anticipated in Fitch's prior forecast. The 777-300ER experienced the greatest deviation from Fitch's depreciation assumptions, with values being impacted by the launch of Boeing's 777x program and by the anticipated entrance of the competing Airbus A350-1000. Values for the 787-8 have performed in-line with Fitch's expectations. As such, loan-to-value ratios remain consistent with our previous forecasts and the transaction retains a high degree of overcollateralization, supporting the 'A' rating.

The maximum LTV produced by Fitch's stress scenario is 90.4%, which implies a significant amount of cushion for senior tranche certificate holders. The ratings are also supported by a strong collateral package consisting of new-delivery Tier 1 aircraft, an 18-month liquidity facility, cross-collateralization/cross-default features, and Fitch's assessment of the UK insolvency regime. The rating incorporates a secondary dependence on the credit quality of BA as the obligor under the leases.

The 'BBB' rating for the B-tranche is based on a ratings uplift compared with BA's stand-alone credit profile, largely based on a high affirmation factor and the presence of an 18 month liquidity facility. The affirmation factor for this pool is considered high as all three aircraft types in the transaction are core to BA's fleet plan. Fitch believes that the likelihood of these aircraft being affirmed in a restructuring scenario effectively reduces the B-tranche probability of default compared to BA's credit profile.

KEY ASSUMPTIONS

Key assumptions included in Fitch's rating case include current base values for the collateral aircraft provided by an independent appraiser. Depreciation rates and value stresses incorporated into Fitch's base and stress case scenario are in line with those used for similar Tier 1 assets as described in Fitch's EETC criteria.

RATING SENSITIVITIES

Senior Tranche Ratings are primarily based on a top-down analysis based on the value of the collateral. Therefore, a negative rating action could be driven by an unexpected decline in collateral values beyond those that Fitch has assumed in its analytical models. Within a rating category, Fitch may also adjust the senior tranche ratings based on various factors including the issuer's underlying credit quality. Fitch could upgrade the senior tranche by one notch based on future movement of BA's credit profile.

Subordinated tranche ratings are based off of the underlying airline IDR. As such, Fitch could upgrade the B tranche to 'BBB+' based on future movement of BA's credit profile. Fitch does not currently anticipate a negative rating action on the subordinate tranche.

Additional information is available on www.fitchratings.com

Applicable Criteria

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage (pub. 28 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749393

Rating Aircraft Enhanced Equipment Trust Certificates (pub. 12 Sep 2013)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=717763

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=986565

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=986565

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Primary Analyst
Joe Rohlena, CFA
Director
+1-312-368-3112
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Craig Fraser
Managing Director
+1-212-908-0310
or
Committee Chairperson
David Peterson
Senior Director
+1 312-368-3177
or
Media Relations:
Alyssa Castelli, New York, +1 212-908-0540
Email: alyssa.castelli@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Joe Rohlena, CFA
Director
+1-312-368-3112
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Craig Fraser
Managing Director
+1-212-908-0310
or
Committee Chairperson
David Peterson
Senior Director
+1 312-368-3177
or
Media Relations:
Alyssa Castelli, New York, +1 212-908-0540
Email: alyssa.castelli@fitchratings.com