18-Mar-2010 12:35 PM

Moody's cuts British Airways' rating further into junk territory

Moody's Investors Service lowered British Airways' corporate family further one notch further into junk territory, commenting that pension woes would be a burden into "the foreseeable future" (Dow Jones/Marketwatch, 17-Mar-2010). However, the ratings agency added that the company's liquidity remains satisfactory, noting that the carrier's planned merger with Iberia Lineas Aereas de Espana represents a positive development for both airlines, although it believes the financial impact will be longer term. Moody's also lowered BA's corporate family and probability of default ratings by one notch each to B1 (which is four notches into junk territory). Last month, Standard & Poor's Ratings Services lowered BA by one notch to BB- (which is one notch above Moody's new rating), citing expectations of only a gradual improvement in the sector in 2010 and 2011, as well as potential for labour issues and uncertainty about pension issues.

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