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Fitch: Shareholder Commitment Remains Key for Etihad’s Ratings

The ratings of Etihad Airways and the notes issued by EA Partners I B.V. and EA Partners II B.V., which are currently unchanged, are largely driven by shareholder commitment to Etihad Airways’ mandate to establish a commercially viable airline and an economic contributor through equity airline partnerships. As a result, the ratings may be affected by the planned reshuffle of Etihad Aviation Group’s top management if it leads to a material change in the group’s growth strategy resulting in diminished shareholder support for Etihad Airways itself and its equity partners, says Fitch Ratings.

Etihad Aviation Group announced the retirement of the group’s CEO and CFO in the second half of 2017 and that it plans to undertake a strategic review focusing on the company’s size and shape as well as efficiency and revenue management. While the group confirmed its commitment to equity airline strategy it stated its intention to adjust the equity airline partnerships.

Etihad Airways’ ‘A’ rating is notched down from that of the Emirate of Abu Dhabi by three notches as Fitch assesses the strategic and operational ties and, to a lesser extent, the legal ties between the company and the Emirate as strong. Etihad Airways’ standalone credit profile remains significantly lower than the current ‘A’ rating, in our view.

The notes’ ratings under EA Partners I B.V. and EA Partners II B.V. are constrained at the ‘B-‘ and ‘B’ levels, respectively, by the obligors of the weakest credit quality. The rating of the notes reflects Fitch’s view of the creditworthiness, and the senior unsecured ranking, of the obligors, including our assessment of their links with their respective parents. The obligors include Air Berlin, Alitalia, Etihad Airways, Etihad Airport Services, Air Serbia, Air Seychelles as well as Jet Airways in EA Partners I B.V. only.

“Should the strategy review and appointment of a new CEO lead to a weaker commitment and support of Abu Dhabi for Etihad Airways’ equity airline strategy, we may re-assess the links of the obligors under EA Partners I B.V.’s and EA Partners II B.V.’s transactions with their respective parents. This may have an adverse impact on the notes’ ratings. If the leadership change and strategy review result in a material reduction in Abu Dhabi’s commitment to support the implementation of Etihad Airways’ mandate, we may consider revising the top-down rating approach to Etihad Airways,” said Fitch.

Date: January 26, 2017
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