S&P upgrade a boon for Delta, customers
The firm cited Delta’s consistently strong earnings and cash flow, which has allowed Delta to significantly pay down its debt, while returning cash to shareholders via dividend payouts and share buybacks.
S&P raised the rating to BB+, which is one notch below investment grade, with a stable outlook.
“The upgrade is based on our expectation that Delta’s credit measures will continue to strengthen in 2015 and 2016,” said Standard & Poors credit analyst Philip Baggaley.
S&P also noted in a press release that it expects Delta’s earnings and free cash flow to further improve now that the company has settled most of its fuel hedges.
“This new rating demonstrates the strength of our business model as we continue to build Delta into a high-quality S&P 500 industrial company that delivers growing value for our employees, customers and investors,” said Paul Jacobson, Delta’s executive vice president and chief financial officer. “It has been one of our goals to achieve an investment-grade rating, and we’re getting very close.”
In addition to validating Delta’s performance, an improved credit rating means more flexibility and lower costs for the airline when it comes to financing capital expenditures such as aircraft and airport improvements.
Delta has focused on its balance sheet in recent years by lowering debt and closely managing capital spending and costs. Over the past two years Delta has returned over $3 billion to shareholders and has reduced its debt by $10 billion. The company also has paid out $1.6 billion in profit-sharing to employees for 2013 and 2014.
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