Maximise your Avios, air miles and hotel points

British Airways has its debt rating cut to ‘junk’ status by Fitch

Links on Head for Points may pay us an affiliate commission. A list of partners is here.

British Airways has become the first major European airline to have its debt rating cut to ‘junk’.

Fitch, the ratings agency, cut BA’s rating from BBB- to BB+ today.

(For clarity, this downgrade is specifically for British Airways and not for its parent, International Consolidated Airlines Group.  This is because the debt which has been downgraded is ringfenced against the BA operation.)

You can see a summary of Fitch’s reasoning here.

British Airways parent has its debt rating cut to 'Junk' status

Fitch believes that British Airways will not be operating a schedule as large as it did in 2019 until 2023, and that even by 2023 aircraft will be emptier than they were in 2019.  

To be precise, it is expecting BA to operate 22% fewer seats in 2021 than it did in 2019, and 5% fewer in 2022.  Even though it will be operating a comparable schedule in 2023, Fitch is still assuming that it sells fewer seats per flight (80% vs 84%) than it did in 2019.  It is also expecting a single-digit decline in average ticket prices.

The airline is still expected to deliver positive operating cash flow in 2021 but this will not cover its debt and capital expenditure requirements.  90% of IAG fuel requirements are hedged for 2020 so there is minimal benefit from the current low oil price.

As well as cutting the rating to ‘junk’, British Airways debt has been put on ‘negative outlook’.  This means that Fitch believes that it is more likely to be downgraded further rather than given back its investment grade rating.

Part of the reason for the negative outlook, apart from uncertainty over the speed of demand recovery, is the current, expensive, aircraft order book for British Airways.

Last year, it placed a firm order with Boeing for 18 x Boeing 777-9 aircraft (pictured below).  These have a list price – admittedly before a substantial discount which BA will have negotiated – of $442 million each.

As of February 2019, British Airways was also committed to 12 x Boeing 787s, four 777-300ERs and 18 x Airbus A350, albeit some of these are already delivered.

It is worth noting that S&P and Moody’s still retain an investment grade credit rating on British Airways, albeit with a negative outlook.  This is important as many funds will be forced to sell their BA debt when two of the three rating agencies move it to ‘junk’ status.

One upside is that Fitch does believe that British Airways has enough liquidity to fund itself during Quarter 2, with recovery beginning from July.  It believes that the culture of cost-cutting and its strong position on valuable North American routes will provide strong support.

You can read more on the Fitch website here.

How to earn Avios points from UK credit cards

How to earn Avios from UK credit cards (January 2022)

As a reminder, there are various ways of earning Avios points from UK credit cards.  Many cards also have generous sign-up bonuses!

There are two official British Airways American Express cards with attractive sign-up bonuses.

There are special sign-up bonuses on both of the BA American Express cards until 28th February 2022. The bonus on the free card is doubled to 10,000 Avios and the bonus on the Premium Plus card is increased from 25,000 Avios to a huge 40,000 Avios.

British Airways BA Amex American Express card

British Airways American Express

10,000 Avios for signing up (SPECIAL OFFER) and an Economy 2-4-1 voucher for spending ….. Read our full review

British Airways BA Premium Plus American Express Amex credit card

British Airways American Express Premium Plus

40,000 Avios (SPECIAL OFFER) and the UK’s most valuable card perk – the 2-4-1 voucher Read our full review

You can also get generous sign-up bonuses by applying for American Express cards which earn Membership Rewards points, such as:

Nectar American Express

American Express Preferred Rewards Gold

Your best beginner’s card – 20,000 points, FREE for a year & two airport lounge passes Read our full review

American Express Platinum card Amex

The Platinum Card from American Express

30,000 points and an unbeatable set of travel benefits – for a fee Read our full review

Run your own business?

We recommend Capital On Tap for limited companies. You earn 1 Avios per £1 which is impressive for a Visa card, along with a sign-up bonus worth 30,000 Avios.

30,000 Avios is a special offer which runs to 4th February 2022.

Capital on Tap Visa card

Capital On Tap Business Rewards Visa

30,000 points bonus – the most generous Avios Visa for a limited company Read our full review

You should also consider the British Airways Accelerating Business credit card. This is open to sole traders as well as limited companies and has a 45,000 Avios sign-up bonus.

45,000 Avios is a special offer which runs to 28th February 2022.

British Airways Accelerating Business American Express card

British Airways Accelerating Business American Express

45,000 Avios sign-up bonus – plus annual bonuses of up to 30,000 Avios Read our full review

Click here to read our detailed summary of all UK credit cards which earn Avios. This includes both personal and small business cards.

(Want to earn more Avios?  Click here to visit our home page for our latest articles on earning and spending your Avios points and click here to see how to earn more Avios this month from offers and promotions.)

Comments (64)

  • Steve says:

    It’s all good. The Fed has announced they will buy recently downgraded debt, so more central banks will follow suit. So these poorly managed, low margin, poor customer service, fat cat sponsored, share buy back companies will survive. Hooray. The rich get richer and the poor get poorer. Hyperinflation and social instability to follow. Ho hum. Thank god for my 10 square meter garden to grow my food in

  • southlondonphil says:

    Fitch’s commentary on BA’s Rating is here:

    It’s slightly more detailed than the Bloomberg report and provides some insight into their thinking re: expected capacity and load factors going forward. The point about 2023 is that Fitch forecasts that it will take until then for BA to be operating the same level of flight capacity (measured in seat-kilometres) as it did at the end of 2019

  • Rich says:

    When health returns, the natural instinct is to tread carefully, having experienced the result of such a pandemic. People are NOT going to rush back to “normality” they will tread carefully – and financially, very very carefully. Disposable income will be a novelty anyway due to loss of income and jobs. Many will save for the next rainy day.
    Will airlines try to suck in leisure travellers by slashing fares? I doubt it very much. It still costs $x per mile to keep a plane functional. Yes there will be some comparatively good deals I’m certain of that but there wont be giveaway fares by any means. It doesn’t make financial survival sense.
    Finally watch out for loyalty schemes; they may well be suspended or vastly devalued to save money. That makes financial sense.
    Personally, we will resume our travelling as soon as we can.

  • AndyF says:

    Who earns the bulk of IAG profits out of the four or so airlines?

    • Rob says:

      BA. By a long way.

      • ChrisBCN says:

        According to their 2019 report, BA earnt 68% of IAG profits, and 57% of their revenue. This share dropped on the previous year and was expected to drop again this year, as most of the growth comes from the other brands.

        • Spaghetti Town says:

          That’s not shocking though is it. BA is by far the most mature of the IAG brands and is severely restricted on growing its home hub.

          It’s mainly a cash-cow ticking over.

  • Zumodenaranja says:

    Ironic that the much criticised cost-cutting regime at BA may be the very thing that saves the company!

  • insider says:

    i see that Delta also received a junk rating from Fitch today – obviously an industry wide viewpoint

The UK's biggest frequent flyer website uses cookies, which you can block via your browser settings. Continuing implies your consent to this policy. Our privacy policy is here.