Fitch Ratings has affirmed Ryanair Holdings (RYA) Long-Term Issuer Default Ratings (IDR) and Ryanair DAC’s senior unsecured rating at ‘BBB+’. The Outlook on the IDR is Stable.
Fitch commented that Ryanair’s conservative and simplified business model tempers the impact of gross financial leverage and operating leverage that are characteristic of the airline industry. Its leading cost position, liquidity, high margins and significant cash generation give it the ability to withstand the shocks that periodically hit the airline industry, as well as fending off competitive threats, says Fitch. Ryanair’s low fleet age and fleet commonality also support the ratings.
The low-cost carrier generated about 28% of its revenue in sterling in FY16, compared with about 21% of sterling costs excluding fuel. Any decline in international UK traffic as a result of the Brexit vote could adversely affect Ryanair’s profits, warns Fitch. “We note the limited visibility on the Brexit outcome and its impact on air travel. The depreciation of sterling post the Brexit vote also highlights the currency exposure risk, although our projections do not factor in a material negative foreign-exchange impact.”
The unsecured rating covers €2.45 billion of debt (pro forma for €750 million bond issued in February 2017), and is aligned with Ryanair’s IDR despite potential subordination to its secured debt of about €2.3 billion. Factors supporting the alignment of the unsecured ratings with the IDR include the company’s strong credit profile, a strong liquidity position, the value of the enterprise relative to the outstanding debt and estimated unencumbered asset to unsecured debt ratio of greater than 2x.Date: March 20, 2017