The Airline Analyst Financial Ratings Webinar Presentation 18 th January Michael Duff, Managing Director, The Airline Analyst

Transcription

1 Webinar Presentation 18 th January 2013 Michael Duff, Managing Director, The Airline Analyst April 2011

2 Outline The Airline Analyst TAA Financial Ratings Overview of Results Methodology Review of Some Airline Peer Groups Conclusion Q&A

3 The Airline Analyst Financial and operational data for 175 airlines Web application as well as database Industry template Customisable Individual airlines, peer group comparisons and aggregate data Unique functionality Latest Twelve Months Data downloadable

4 Response to client demand Help fill the gap left by the ratings agencies Comparative ratings of intrinsic financial condition Based on 5 key indicators very similar to those used by ratings agencies Applied equally to all airlines Transparent Reconcilable to public ratings Based on LTM data so incorporates most recent available financials Use to help benchmark or sense-check existing systems or ratings

5 Number of Airlines Results Ratings Distribution for Passenger Airlines median

6 Number of Airlines Results Ratings Distribution for Passenger Airlines investment grade 5 0

7 Number of Airlines Results Ratings Distribution rated CC

8 LTM - 2 LTM - 1 LTM Column1 Fitch Moody's S&P Fitch Moody's S&P Results Compared to Existing Public Ratings TAA Financial Ratings - Last 3 LTM Periods Ratings Agency Unsecured Ratings TAA Notches Difference Airline Air Canada B+ B+ B Caa1 B- (neg) Air New Zealand BBB- BB- BB Baa3 (neg) 2- Alaska Airlines A A- A- BB- (pos) 6+ Allegiant Travel Company BBB A- A Ba3 BB AMR Corporation CCC+ CCC CCC+ C D N/A N/A British Airways BB BBB BB+ BB BB Delta Air Lines B+ B+ BB B+ B2 B (pos) GOL B+ B- CCC- B+ B3 B jetblue BB BB BB B- B3 B LAN Airlines BBB BBB- BB- BB+ 2- Lufthansa Group BB BBB- BBB- Ba1 BBB Qantas Airways BBB BBB- BB Baa3 BBB SAS B- CCC CCC Caa1 B- (neg) Southwest Airlines A- BBB BBB- BBB Baa3 BBB United Continental Holdings BB- BB- B+ B B2 B US Airways B CCC+ B B- B3 B

9 TAA and Public Ratings Compared

10 TAA and Public Ratings Compared

11 TAA and Public Ratings Compared

12 TAA and Public Ratings Compared

13 TAA and Public Ratings Compared

14 Methodology Reviewed approach by ratings agencies Identified key drivers they use and that are available for all airlines: Average fleet age Operating margin Coverage Liquidity Leverage Selected ratings scale Experimented with different weightings and mappings to ratings scale Tested results with those of the ratings agencies Refined

15 Ratings Criteria Rating Weighting AAA AA A BBB BB B CCC CC Points Average Age of Fleet 8% < 3 years 3-6 years 6-9 years 9-12 years years years years > 21 years EBITDAR Margin 23% > 40% 35-40% 30-35% 25-30% 20-25% 15-20% 10-15% < 10% Fixed Charge Cover 23% > 4x x x x x x x < 1x Liquidity as % of Revenue 23% > 35% 30-35% 25-30% 20-25% 15-20% 10-15% 5-10% < 5% Adjusted Net Debt / EBITDAR 23% < 1x x x x x x x > 10.0 x

16 User Settings

17 Ratings Process Air New Zealand Example

18 Some US Carriers in Detail

19 Investment Grade Aspirers Airline name LTM Ending Revenue USDm Average Age of Fleet EBITDAR Margin (%) Fixed Charge Cover Liquidity Adjusted Net Debt / EBITDAR (x) Fleet EBITDAR Margin FCC Liquidity Leverage FRS Financial Rating Copa Holdings 30-Sep-12 2, % % A+ Copa Holdings 30-Sep-11 1, % % A- Copa Holdings 30-Sep-10 1, % % A- Emirates 31-Mar-12 16, % % BB Emirates 31-Mar-11 14, % % BBB- Emirates 31-Mar-10 11, % % BB+ Cathay Pacific 30-Jun-12 12, % % BB- Cathay Pacific 30-Jun-11 12, % % BBB- Cathay Pacific 30-Jun-10 9, % % BBB+ Qantas Airways 30-Jun-12 16, % % BB Qantas Airways 30-Jun-11 15, % % BBB- Qantas Airways 30-Jun-10 14, % % BBB Southwest Airlines 30-Sep-12 17, % % BBB- Southwest Airlines 30-Sep-11 14, % % BBB Southwest Airlines 30-Sep-10 8, % % A-

20 Five LCCs April 2011

21 European Legacy Carriers

22 Conclusion It is possible to generate meaningful comparative financial ratings based on 5 key variables Must remember they are not credit ratings, but may give guidance Our data set will increase from the current 120 to around 150 airlines Our product is now available for subscription Very happy to receive comments and questions either now or after the Webinar mduff@theairlineanalyst.com hsakhrani@theairlineanalyst.com April 2011

23 Webinar Presentation 18 th January 2013 Michael Duff, Managing Director, The Airline Analyst April 2011