S&P Virgin Australia downgrade
S&P have downgraded Virgin's credit rating from a B to B-. S&P Global Ratings agency expects the downturn in international travel as a result of Covid-19 will "likely spread more deeply into Australia's domestic market", Virgin's predominate market. S&P says Virgin's efforts to reduce capacity, exit loss-making routes and accelerate cost reduction initiatives are unlikely to fully cover the cost of lower travel demand.
Virgin's large cash reserves and investments, worth about $900m, will provide a temporary buffer to the crisis, but S&P acknowledges the company's future stability may rely on it cutting more costs if this crisis continues beyond the next few months. The company's operating environment may be deteriorating at a faster pace than Virgin Australia can implement initiatives to protect cash generation and balance sheet health, S&P said of Virgin.
S&P said it was less likely Virgin would receive extraordinary support from its shareholder airlines, Etihad Airways. Singapore Airlines, Nanshan Group, HNA Group and Virgin Group if it experienced financial stress, with each shareholder experiencing its own challenging conditions.