KBRA Releases Research – Airlines and the Nuanced Role of Sovereigns in Credit

NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) releases its Airlines and the Nuanced Role of Sovereigns in Credit report, which gives insight into KBRA’s nuanced views in evaluating the impact of sovereign risk on an airline’s credit profile.

This report provides an update to KBRA’s Impact of Sovereign Support on Airline Credit Profiles report, published in 2017. Since then, the airline industry has undergone considerable transition, with several notable examples of sovereign bailouts of airlines as well as a number of airline bankruptcies. In addition, heightened macro risks (such as the coronavirus from Wuhan, China, and its impact on airline travel) are influencing the performance of several airlines. Also, as noted in a recent KBRA research report on climate change risks and airlines, sovereign regulatory policies are becoming an increasingly important factor influencing airline strategy and profitability in several jurisdictions across the globe.

The main takeaways from this report include:

• The global nature of airline operations and their important role in domestic economies and national pride are characteristics that warrant special credit considerations compared to other obligors in an economy.
• Ownership structure, systemic importance, and the policy environment are considerations underlying airline credit analysis.
• Airline revenues may largely be hard-currency denominated and may also be derived from non-local sources, helping to insulate an airline from sovereign risk.
• In the case of government-owned airlines, excessive involvement in the management of an airline and protectionist commercial policies could be detrimental to its credit quality.

To access the report, click here.

Related Publications: (available at www.kbra.com)

• Aviation and Climate Change Risks: Current Trends and Future Projections
• Environmental, Social and Governance (ESG) Considerations by Sector: Transportation
• Corporate Aviation 2020 Sector Outlook: Strong Fundamentals Amid Myriad Macro and Geopolitical Challenges

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About KBRA and KBRA Europe

KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.