S&P Global Ratings is revising the outlooks on nearly all long-term debt ratings in the U.S. transportation infrastructure sector, including airlines and airports, due to the severe and ongoing impacts associated with the COVID-19 pandemic.
“We believe the dramatic contraction of the global and U.S. economies and virtual collapse of travel and mobility across the transportation subsectors is a demand shock without precedent, with no definitive indication at this time regarding its duration and severity, as well as the follow-on effects of an economic recession,” the ratings agency says in a release.
S&P Global Ratings says the expected passage of the approximately $2 trillion federal stimulus package that includes $10 billion in direct financial aid to airport operators and $25 billion to other transit authorities will alleviate immediate liquidity pressures, as well as assist with near-term operational funding requirements, including debt service.
“Aid to the airline industry, in the form of loans and loan guarantees, should also support payments from airline tenants to airport operators,” it adds. “However, long-term credit implications across all sectors have yet to unfold, and we expect greater visibility on the broader impacts on issuers’ financial and business profiles in the coming months.”
S&P Global Ratings also says that risks remain that U.S. travel restrictions could expand domestically, with continuing or lingering concerns about health and safety magnifying the negative effects across the travel value chain.
“Even when travel restrictions are lifted, we believe there may be an extended period before volume levels return, which pressures near-term credit quality,” the ratings agency says. “Also, systemic or permanent changes in consumer and industry behavior, shifts in supply chains, economic softening, and recessionary pressures could affect our view of long-term ratings.”
