Fitch Ratings affirms Spirit Airlines BB+ rating

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By admin July 28, 2016 20:06

Fitch Ratings affirms Spirit Airlines BB+ rating

Fitch Ratings has affirmed the Issuer Default Rating for Spirit Airlines at ‘BB+’. The Rating Outlook is Stable. Fitch has also affirmed the ratings on Spirit’s 2015-1 series of enhanced equipment trust certificates.

The rating is supported by Spirit’s solid profitability, healthy liquidity, and low cost structure. Spirit’s cost advantage over its peers remains a significant ratings factor as it provides the company a meaningful cushion to operate through potential future economic downturns while maintaining adequate financial health. The company’s 20%+ EBIT margins have put it among the most profitable airlines in the industry for the past five years. Despite significant unit revenue headwinds and Fitch’s expectations that operating margins will decline from highs seen in 2015, Spirit is still expected to generate above average margins throughout our forecast period.

Fitch’s primary rating concerns revolve around the high levels of capital spending required to support Spirit’s growth plans and around increasing competition from the major carriers. Heavy capital spending and higher debt balances combined with top-line revenue pressures stemming from increasing industry competition and low oil prices may cause credit metrics to deteriorate modestly over the near term. Competition is also a particular area of focus for Spirit as the major network carriers are increasingly willing to matching Spirit’s low fares and are introducing various stripped down economy products to better compete with ultra-low cost carriers.  Other concerns are typical of the airline industry and include Spirit’s unionized workforce, high degree of operating leverage, exposure to fluctuating fuel prices, and exogenous shocks that could cause demand for travel to drop quickly.

admin
By admin July 28, 2016 20:06