Delta Cut to Junk by Fitch as 35,000 Workers Take Leave

(Bloomberg) —

Delta Air Lines Inc. has been downgraded by Fitch Ratings to junk.

The firm lowered its rating on Delta’s debt to “BB+” from “BBB-” and warned that another downgrade is possible as air travel suffers with the spread of the coronavirus. The airline does, however, have more financial flexibility than some rivals, Fitch said in an assessment of the industry.

“Though Delta remains a stronger credit than its network peers, debt raised to sustain liquidity through the pandemic will drive credit metrics outside of a range supportive of investment-grade ratings at least through 2021 and likely into 2022,” Fitch said in a statement.

Airlines have been battered by the collapse in travel, and have responded by offering workers leaves, grounding planes, cutting flights and freezing hiring, among other steps. The number of passengers screened at airport security checkpoints has fallen more than 90% from a year ago, the Transportation Security Administration has said.

The airline said almost 35,000 employees have taken voluntary leave, and is encouraging more to apply.

Volunteers to take unpaid leave “are by far the most impactful” step the carrier is taking to reduce operating costs, Chief Executive Officer Ed Bastian told workers in a memo Thursday. The airline is enhancing benefits provided to those taking time off and is extending absences of up to 12 months to encourage more to apply, he said.

Delta’s flying capacity at New York’s LaGuardia airport has been cut by more than 90% this month, and by more than 80% at New York’s John F. Kennedy and Newark, New Jersey’s Liberty Airport, Bastian said.

The airline lost its investment-grade status at S&P Global Ratings last month.

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