KBRA Releases Report – European Airlines: Clear Skies or More Turbulence Ahead?

NEW YORK–(BUSINESS WIRE)–Kroll Bond Rating Agency (KBRA) releases its European Airlines: Clear
Skies or More Turbulence Ahead? report in response to the ongoing
challenges in the European airlines sector.

There have been 20 notable European airline bankruptcies since 2015,
which has brought the region into focus for investors and other
stakeholders alike. Amid continuing market saturation and competitive
pricing—exacerbated by fuel price volatility, rising foreign exchange
costs, and local euro area economic uncertainty—profitability growth in
the region has started to stagnate and is forecast to decline in 2019.
But despite these current headwinds, Europe’s aviation sector is poised
to remain at profitable levels, albeit at lower levels.

KBRA notes that these headwinds are more likely to be felt by specific
business models at risk rather than by all airlines in general, as was
the case in post-financial crisis 2009, when the region recorded $5
billion in losses. In other words, airline exposure will vary based on
business models, risk management savvy, as well as scale and economic
conditions. We expect the European passenger airline market to remain in
a difficult operating environment due to oversaturation, declining
passenger yields, and volatile fuel and FX costs, which affect airlines
of all sizes in the region. The potential for an economic slowdown in
the region would further exacerbate an already challenging situation.

KBRA adds that the European airline sector is ripe for further
consolidation as larger carriers continue to absorb smaller ones in
difficulty—a credit positive for the airlines as a whole in Europe,
given better scale and efficiency as well as less competition.

To view the report, click here.

Related Publications: (available at www.kbra.com)

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• Comment
  on the Grounding of the Boeing 737 Max Fleet
• 2018
  Aircraft Lessors and Secured Aircraft: Year in Review and 2019 Outlook

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About KBRA and KBRA Europe

KBRA is a full-service credit rating agency registered with the U.S.
Securities and Exchange Commission as an NRSRO. In addition, KBRA is
designated as a designated rating organization by the Ontario Securities
Commission for issuers of asset-backed securities to file a short form
prospectus or shelf prospectus. KBRA is also recognized by the National
Association of Insurance Commissioners as a Credit Rating Provider and
is a certified Credit Rating Agency (CRA) by the European Securities and
Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is
registered with ESMA as a CRA.

Contacts

Analytical:

Marjan Riggi, Senior Managing Director
(646) 731-2354
mriggi@kbra.com

Thomas Moore, Analyst
(646) 731-3375
tmoore@kbra.com