NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) has released a macro-market research report titled, “Impact of Sovereign Support on Airline Credit Profiles.”
Sovereign ratings can be an important factor in determining airline ratings in KBRA’s analysis. Many airlines, especially national airlines or flag carriers, are symbols of national sovereignty and can be fully or partially state-owned, thereby enjoying sovereign support. In addition, there are many ways in which a sovereign can support entities, airlines included, within its jurisdiction. Examples include legal protections to creditors and explicit financial support to an airline in distress. In some countries, flag carriers might enjoy sovereign support through policies that limit competition.
KBRA notes that the way in which sovereign ratings and support may influence the credit profile of an airline is somewhat more nuanced than other corporates within the same jurisdiction. This mainly stems from the global nature of airline operations and their important role in domestic economies and national pride, characteristics that give them special credit considerations compared to other obligors in an economy. Airline revenues may largely be hard-currency denominated and may also be derived from non-local sources. These characteristics may only go so far in isolating an airline from a crisis in the home country but the combination of support and revenue diversification often helps provide lift to airline ratings beyond what would otherwise be the case.
The full report is available here.
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KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).