This Airline Credit Rating Downgrade Makes No Sense
It's not exactly news that the COVID-19 pandemic has severely impacted the airline industry. Air travel virtually ground to a halt this spring due to the imposition of stay-at-home orders and other travel restrictions. On several days in mid-April, the TSA screened fewer than 100,000 passengers, compared to more than 2 million on a typical day in 2019. As a result, airlines' revenue virtually evaporated.
While the federal government stepped in to provide assistance, some of that came in the form of loans. On top of that, airlines have had to issue a significant amount of new debt to cover near-term cash burn. That has led to a slew of credit-rating downgrades across the sector.
The most recent downgrade came late last week, as S&P cut its credit rating on JetBlue Airways (NASDAQ: JBLU) to B+: four notches into junk territory. It also maintained its negative outlook on the company, indicating the potential for additional ratings downgrades. Yet this ratings action ignores the fact that JetBlue actually has one of the best balance sheets in the U.S. airline industry.
Source Fool.com
