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Moody's Investor's Service has changed the "outlook" comment it puts on Air New Zealand's credit rating because of weakening industry conditions.
But the credit rating company said that given "implied government support", Air New Zealand's financial indicators would have to materially deteriorate for a rating downgrade.
It cited operating profit margins trending towards 15 per cent, and operating earnings coverage of interest payments below two times as examples of financial indicators.
Air New Zealand has a Ba1 Senior Unsecured Issuer rating. The outlook on that rating is now stable rather than positive.
"Cooling demand in New Zealand and elsewhere is likely to reduce business and leisure travel, reducing top line momentum for an uncertain period," says Clement Chong, a Moody's vice-president.
"While the company has effectively reduced its cost structure over the past several years, its flexibility at this stage to either dramatically reduce costs or pass through jet fuel price increases, without affecting sales and earnings, is constrained," he said.
- NZPA
