Six European Airlines Downgraded As COVID-19 Impact Erodes Credit Metrics; Majority Still On Watch Negative

May 20, 2020

- We now believe that travel and other restrictions due to COVID-19 could result in global air PRIMARY CREDIT ANALYSTS

passenger traffic dropping by up to 50% in 2020, which is a steeper decline than we Izabela Listowska anticipated, with the recovery taking longer, possibly stretching into 2023. Frankfurt (49) 69-33-999-127 - The massive revenue shortfall at major airlines will only be partly offset by strict cost-cutting izabela.listowska and cash-conservation measures, so we forecast significantly weaker credit metrics in 2020 @spglobal.com

and 2021 than in our previous base case, with liquidity remaining under pressure. Frank Siu, CFA - Furthermore, high uncertainty regarding the severity and duration of the COVID-19 pandemic London and global recession could lead us to revise down our forecasts in the future, implying risks for + 44 20 7176 3670 Frank.Siu the ratings. @spglobal.com

- We are therefore lowering by two notches our ratings on IAG and British Airways and assigning Aliaksandra Vashkevich negative outlooks. We are downgrading Air Baltic, Lufthansa, easyJet, and TAP Air Portugal by Frankfurt one notch, and keeping those ratings, along with our ratings on Ryanair and SAS on + 49 693 399 9178 CreditWatch negative. We are affirming our rating on Turkish Airlines and assigning a negative Aliaksandra.Vashkevich @spglobal.com outlook. SECONDARY CONTACTS - We will continue monitoring the impact of the pandemic and resulting recession on each Rachel J Gerrish, CA company's credit metrics and liquidity, and take rating actions as necessary within the next London 3-12 months, depending on implications for the airline industry and measures airlines may take (44) 20-7176-6680 to mitigate them. rachel.gerrish @spglobal.com

FRANKFURT (S&P Global Ratings) May 20, 2020--S&P Global Ratings today lowered its ratings on Stuart M Clements six European airlines following previous downgrades and CreditWatch placements in the industry London on March 20, 2020. (44) 20-7176-7012 stuart.clements More specifically, we lowered to 'BB' from 'BBB-' and assigned negative outlooks to our long-term @spglobal.com ratings on: ADDITIONAL CONTACT

- International Consolidated Airlines Group, S.A. (IAG). We also lowered our issue rating on IAG's Industrial Ratings Europe unsecured debt to 'BB' from 'BBB-' and assigned a '3' recovery rating (rounded recovery Corporate_Admin_London @spglobal.com estimate: 65%).

- British Airways PLC (BA). We have also lowered our issue ratings on BA's 2019-1 Class AA enhanced equipment trust certificates (EETCs) to 'A+' from 'AA-' and our ratings on the 2019-1 Class A EETCs to 'BBB' from 'BBB+'. We have affirmed our issue ratings on BA's 2013-1 Class A and Class B EETCs at 'A' and 'A-, respectively.

www.spglobal.com/ratingsdirect May 20, 2020 1 Six European Airlines Downgraded As COVID-19 Impact Erodes Credit Metrics; Majority Still On Watch Negative

We lowered by one notch our long-term ratings on:

- Air Baltic Corp. AS and its unsecured debt to 'B' from 'B+'.

- Deutsche Lufthansa AG to 'BB+' from 'BBB-'. Additionally, we lowered our short-term rating to 'B' from 'A-3' to bring it in line with the long-term rating and remove it from CreditWatch negative. We assigned a 'BB+' issue rating and '3' recovery rating (rounded recovery estimate of 65%) to Lufthansa's senior unsecured debt. At the same time, we lowered our issue rating on its junior subordinated debt (hybrid bond) to 'B' from 'BB'.

- easyJet PLC and its unsecured debt to 'BBB-' from 'BBB'.

- Transportes Aereos Portugueses, SGPS, S.A. (TAP Air Portugal) and its core operating subsidiary Transportes Aereos Portugueses, S.A. to 'B-' from 'B'. We also lowered our issue rating on the airline's unsecured debt to 'B-' from 'B'. The recovery rating remains at '4' (rounded recovery estimate of 45%).

Our long-term issuer credit and issue ratings on these four airlines remain on CreditWatch with negative implications.

We have affirmed our 'B' long-term ratings on Turk Hava Yollari A.O. (Turkish Airlines) and assigned a negative outlook. We have also lowered our issue rating on THY's 2015-1 Class A EETCs to 'BB-' from 'BB'.

At the same time, we have kept on CreditWatch negative all our ratings on:

- Ryanair Holdings PLC (BBB/Watch Neg/--)

- SAS AB (B/Watch Neg/--)

The COVID-19 pandemic is still threatening the credit quality of European airlines, posing serious challenges for the global aviation industry as a whole. Actions to contain the pandemic, including government-imposed social-distancing measures, travel restrictions, and stay-at-home orders, have suddenly and sharply reduced global demand for air travel. We think global air passenger traffic could drop by 50% in 2020, and by 55% in Europe, which is approximately in line with the most recent forecasts by the International Air Transport Association (IATA). For 2021, we believe passenger volumes could remain up to 30% below 2019 levels, both globally and in Europe, and we don't expect air traffic to rebound to pre-pandemic levels before 2023. Recovery will also be influenced by how airlines restructure and downsize their fleets to meet lower demand. Although a vaccine may ultimately protect populations, the risk of renewed outbreaks over the next 12-18 months is real and will likely make governments hesitant about lifting international travel restrictions. China, for instance, has prohibited the re-entry of foreigners and requires mandatory quarantine measures for Beijing.

Air traffic across Europe has been at unprecedented lows over the past two months, and the macroeconomic outlook has further deteriorated. We now forecast a global recession this year, with GDP growth falling 2.4% in 2020 before rebounding to 5.9% in 2021, with the eurozone contracting 7.3% and recovering with 5.6% growth. Most European airlines have temporarily grounded almost all of their aircraft until at least the end of June 2020, although some have announced it will take longer for their operations to begin in earnest. We think domestic travel will increase before international travel, since international borders will take longer to open up. The revenue shortfall and fixed operating costs, only partly offset by strict cost-cutting measures and deferral or suspension of discretionary spending, will compress earnings and cash flows, resulting in weaker credit metrics for European airlines we rate in 2020 and 2021 than we previously

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forecast.

Airlines that can radically cut costs and investments, minimize negative free cash flow, retain uninterrupted excess to external funding, or benefit from government support are more likely to survive. We believe airlines that were not previously lean from a cost perspective may be overwhelmed by the challenges of COVID-19. Several weaker airlines may not be able to cope with the consequences and follow Flybe, Virgin Australia, and most recently Avianca, which all collapsed in recent months. Most European airlines report that 40%-50% of their operating costs are fixed. Clearly, fuel costs have dropped significantly since the COVID-19 outbreak and are typically considered 100% variable. However, unlike most (but not all) of their U.S. peers, the majority of European airlines have extensive hedging programs and, depending on the types of hedges used, settling existing fuel hedges at pre-agreed terms could be extremely expensive. Many players have reported large ineffective fuel hedge losses, which we include as an operating cost in our calculation of EBITDA. Landing fees and enroute charges are typically 100% variable, while 60%-80% of handling/catering, maintenance, repair, and overhaul or engineering expenses are flexible. Staff costs have shown somewhat more flexibility than we previously anticipated, thanks to governments' employee furlough schemes; airlines have also recently announced redundancies.

The expected decline in cash flow generation will weigh on liquidity profiles. Furthermore, unearned revenue liabilities are typically high for airlines because they sell tickets in advance. A high proportion of cash refunds being paid out in a matter of months would strain liquidity. We understand that many customers have opted for re-bookings or vouchers, so cash refunds have been fairly modest since the coronavirus outbreak began. Nevertheless, the risk that refund requests accelerate remains, in particular as long as fleets are grounded. Since national airlines remain important for a country's global connectivity, tourism, employment, and business development, European governments have granted support to domestic airlines or are currently negotiating various potential support measures to help them through this difficult period. These include employee-furlough schemes through state-backed loans that will boost liquidity but result in higher leverage and weaker ratios, as well as equity participations or capital injections. We note that EU rules typically restrict such state support because it distorts market competition. However, a temporary framework has been put in place to accommodate measures to counteract the economic effects of this serious disruption.

Long-term prospects for the European airline industry remain bleak. The marked deterioration in Europe's macroeconomic outlook, and the likelihood that social distancing measures will continue for a sustained period, mean that a complete recovery of the airline industry is highly uncertain. There has been much industry speculation regarding structural changes to the industry that may occur as a result of the COVID-19 pandemic:

- Social distancing may require less crowded security checks, shorter queues, and changes to aircraft seating configuration, together with heightened health and sanitation measures.

- Airlines have dramatically deferred the purchase of new aircraft and we will see reduced fleet sizes.

- Industry consolidation is likely in the medium term as weaker airlines fail.

- The mix of business and leisure travellers could change. More lucrative business travel may decline if employees get used to remote working and working habits evolve.

www.spglobal.com/ratingsdirect May 20, 2020 3 Six European Airlines Downgraded As COVID-19 Impact Erodes Credit Metrics; Majority Still On Watch Negative

A critical element to the industry's recovery will be international coordination on rules and restrictions, including in case of a resurgence of the new coronavirus. This is particularly challenging because the pandemic and related lockdowns are not proceeding simultaneously around the world. Restoring consumer confidence will therefore take time. However, we believe that commercial air travel--still the fastest, most affordable way to move people globally--will remain the preferred (and in many cases only viable) mode of transport for long journeys. One in 10 jobs are linked to tourism, which accounts for 10% of global GDP. Hence we don't anticipate a secular change in the aviation industry, even though the implications of pandemics make it more vulnerable.

S&P Global Ratings acknowledges a high degree of uncertainty about the rate of spread and peak of the coronavirus outbreak. Some government authorities estimate the pandemic will peak about midyear, and we are using this assumption in assessing the economic and credit implications. We believe the measures adopted to contain COVID-19 have pushed the global economy into recession (see our macroeconomic and credit updates here: www.spglobal.com/ratings). As the situation evolves, we will update our assumptions and estimates accordingly.

At the moment, our base-case scenario for the European airline industry factors in these assumptions:

- Passenger revenue declines of 50%-55% in 2020 compared with last year, recovering somewhat in 2021 to about 30% below 2019 numbers. Capacity (available seat miles or kilometers) will decrease less than passenger numbers because it is difficult for airlines to reduce flights to the lower traffic levels while maintaining a viable flight schedule.

- Average ticket price declines by a low-to-mid-single digit percent due to expected overcapacity on long- and short-haul routes, fierce competition, and lower average oil prices. We believe airlines will accept lower yields to fill seats.

- Fuel costs linked to our revised oil price assumptions for airlines that don't hedge fuel consumption, but adjusted for hedging arrangements for those airlines where applicable. We forecast a significant drop in crude oil prices to $30 per barrel (/bbl) for the rest of 2020 versus $64/bbl on average in 2019, followed by a rise to $50/bbl in 2021. We include losses on ineffective fuel hedges in our calculation of adjusted EBITDA. We also factor in severe capacity adjustments because of fewer flights.

- Partly flexible staff costs after airlines' announced redundancies and use of government-funded furloughing schemes.

- EBITDA at best breaking even in 2020, and likely turning negative for many operators before rebounding in 2021, but staying about 40% below the 2019 level. We factor in (1) up to 50% of total costs could be variable under the harshest cost-cutting measures, (2) a structural cut in staff and salaries, and (3) significant benefit from lower jet fuel prices, particularly in 2021.

- A significant reduction or deferral of capital expenditure (capex).

- Suspension of dividends and share buybacks.

Given risks to an eventual recovery, effective liquidity management will remain crucial. The timing of a recovery is uncertain, but we currently assume that the first quarter of the calendar year will be affected only by a much-weaker March, with the second quarter being the toughest for airline operators due to large operating losses. We assume that the third quarter will see a slow increase in air traffic, especially during the crucial summer period, and that in the fourth quarter

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about 50% of capacity will be back in operation. The recovery could be delayed however, particularly if the economic recession drags on and there is a second wave of infections, further pressuring companies' credit metrics. We anticipate negative free operating cash flow (FOCF), even after likely deferrals of aircraft delivery. Aggravating this is working capital requirements, which could escalate because of an increase in customers' requests for refunds (in particular if planes stay grounded) or if bookings remain at unprecedented lows. As such, we expect airlines' immediate focus will be on protecting their liquidity positions in the short term, which might include obtaining some form of government support.

Environmental, social, and governance (ESG) factors relevant to the rating action:

- Health and safety

International Consolidated Airlines Group S.A. (IAG)

Primary analyst: Izabela Listowska

Our downgrade reflects that, although IAG is executing measures to mitigate the collapse in air travel demand in recent months, we expect this won't fully compensate for the sharp drop in revenue. IAG has implemented cost-cutting, operating efficiency initiatives, and drastic capacity reductions, among others, and should benefit from a lower fuel bill (forecast at €4.4 billion in 2020 versus €6 billion in 2019). This includes losses from ineffective fuel hedges, which we treat as operating expenses and were caused by lower fuel prices, and an over-hedged fuel position after a significant cut in capacity.

Still, we estimate that IAG's adjusted EBITDA will be negative in 2020, which is considerably weaker than €5.4 billion in 2019 and our March 2020 forecast of €2.0 billion. This, aggravated by working capital requirements, which could be material because of potentially higher ticket refunds or sluggish bookings, will result in significantly negative free operating cash flows and an accumulation of debt. We forecast IAG's S&P Global Ratings-adjusted debt will double by year-end 2020 to about €15 billion versus 2019. Substantial deferrals or cuts of capital expenditure (capex) for new planes and other discretionary projects to €3.0 billion from the previously scheduled €4.2 billion, and suspension of shareholder returns, will only moderately offset this surge in adjusted debt. This is why we have revised downward our assessment of IAG's financial risk profile to aggressive from intermediate.

We envisage IAG's financial performance improving in 2021, with adjusted EBITDA rising to €3.0 billion-€3.5 billion, and adjusted FFO to debt rebounding to 15%-20% but staying far below the 2019 level of 65%. For these forecasts, we assume passenger traffic will start recovering later this year, benefits from structural cost-cutting measures and lower jet fuel price will feed through, and the airline's net debt will start reducing. Nevertheless, low visibility on the evolution of the COVID-19 pandemic and recessionary trends means our forecasts are subject to significant risks.

Although we factor into our analysis expected financial results for 2020, particularly regarding debt and liquidity, IAG's credit metrics for 2020 are less meaningful to our assessment of financial risk. Because we believe IAG's liquidity and other characteristics should help it navigate through this difficult year, we focus mostly on expected 2021 credit ratios (capturing the significant amount of debt accumulated during 2020). This approach best reflects the airline's cash flow/leverage profile in our analytical judgment, assuming that air travel starts to recover late in 2020.

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IAG's liquidity remains strong despite the expected significantly negative FOCF in 2020. Considering several funding arrangements completed so far this year, we expect liquidity sources to exceed uses by more than 1.7x in the 12 months started March 31, 2020, and by more than 1.5x in the following 12 months, assuming strict capex control, ticket refunds of up to 50% of a €5.4 billion liability from deferred revenue on ticket sales as of Dec. 31, 2019, uninterrupted access to new aircraft funding, and no dividends. IAG had available cash, cash equivalents, and interest-bearing deposits of €6.4 billion as of Dec. 31, 2019. In addition, undrawn general and committed aircraft-backed financing facilities maturing beyond 12 months amounted to €3.6 billion, resulting in total liquidity of €10 billion. Debt maturities are well distributed, with the first large debt maturing in 2022 when a €500 million bond is due. The group has no maintenance financial covenants in the documentation for its outstanding debt.

Our rating on IAG's senior unsecured debt is now at 'BB'. We assigned a recovery rating because we no longer rate the company in the investment-grade category. The '3' recovery rating indicates our expectation that lenders would receive meaningful recovery (50%-70%; rounded estimate: 65%) of the principal in the event of a payment default.

Outlook

The negative outlook reflects our view that IAG's financial metrics will be under considerable pressure in the next few quarters in the difficult environment. In addition, there is high uncertainty regarding the pandemic and economic recession, and their impact on air traffic demand and IAG's financial position and liquidity.

While we currently don't see liquidity as a near-term risk, we would lower the rating by at least one notch if management's proactive actions to cut operating costs and capital investments, and raise additional funds, are insufficient to preserve at least adequate liquidity, such that sources exceed uses by more than 1.2x in the coming 12 months. A downgrade would also likely follow if we expect that adjusted FFO to debt won't recover to at least 12% over 2021. This could occur if the pandemic cannot be contained, resulting in prolonged lockdowns and travel restrictions, or passengers remain reluctant to book flights. We could also lower the rating if industry fundamentals weaken significantly and for a sustained period, impairing IAG's competitive position and profitability.

To revise the outlook to stable, we would need to be confident that demand conditions are normalizing and the recovery is robust enough to enable IAG to partly restore its financial strength, such as adjusted FFO to debt increasing sustainably to at least 12%, alongside a stable liquidity position. We would expect this to be further underpinned by prudent capital spending and shareholder returns.

British Airways PLC

Primary analyst: Frank Siu

Our downgrade reflects that although British Airways (BA) is executing measures to mitigate the collapse in air travel demand in recent months, we expect this won't fully compensate for the sharp drop in revenue. BA has implemented cost-cutting, operating efficiency initiatives, and drastic capacity reductions, among others.

We estimate that BA's adjusted EBITDA will turn negative in 2020 from positive £3.1 billion in 2019. This includes a large amount of ineffective hedging losses caused by the sharply declined

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fuel prices and an over-hedged fuel position as BA cuts capacity significantly. EBITDA shortfall, aggravated by working capital requirements, which could be material because of still-low bookings or potentially higher ticket refunds, will result in significantly negative FOCF and debt accumulation. This is why we have revised downward our assessment of BA's financial risk profile to aggressive from significant, while removing the one-notch adjustment for a positive result under our comparable rating analysis.

We envisage BA's financial performance will improve in 2021, with adjusted FFO to debt potentially recovering toward 15%-20%, which is still significantly below the 70% posted in 2019. For these forecasts, we assume passenger traffic will start recovering later this year, benefits from structural cost-cutting measures and lower jet fuel price will feed through, and the airline's net debt will start reducing. Nevertheless, low visibility on the evolution of the COVID-19 pandemic and recessionary trends means our forecasts are subject to significant risks.

Although we factor estimates for 2020 into our analysis, particularly regarding debt and liquidity, BA's credit metrics for 2020 are less meaningful to our assessment of financial risk. Because we believe BA's liquidity and other characteristics should help it navigate through this difficult year, we focus mostly on expected 2021 credit ratios (capturing the significant amount of debt accumulated during 2020). This approach best reflects the airline's cash flow/leverage profile in our analytical judgment, assuming that air travel starts to recover late in 2020.

We revised downward our liquidity assessment to adequate from strong mainly because we anticipate significantly negative FOCF in 2020. We expect liquidity sources to exceed uses by over 1.2x this year. BA's available cash, cash equivalents, and interest-bearing deposits totaled £2.6 billion at the start of 2020. Combined with about £1.6 billion equivalent of general and committed aircraft-backed financing facilities, and a £300 million COVID-19 Corporate Financing Facility from Bank of England, BA should have sufficient liquidity to cover cash needs this year.

As the largest airline owned by IAG, we consider BA integral to the group's overall strategy. Although there is no firm commitment from IAG, we believe that IAG is likely to support BA under any foreseeable circumstances and that BA will remain a core subsidiary of the group. As such, we equalize our issuer credit rating on BA with that on IAG, which is one notch above BA's 'bb-' stand-alone credit profile (SACP) after the downgrade.

Enhanced Equipment Trust Certificates

Despite our downgrade of BA, we did not lower our ratings on the 2013-1 Class A and Class B EETCs, for several reasons. In the case of the Class A instruments, the rating was previously constrained by our rating on the liquidity provider. Accordingly, the rating would have been higher, based on other characteristics of the certificates, if the liquidity provider was rated higher. Second, our expectation of collateral coverage is slightly less stringent for speculative-grade airlines than for investment-grade airlines, since the former are more likely to become insolvent in stressful conditions. Therefore, BA's transition to speculative grade offsets one of the two downgrade triggers for both classes of certificates in our collateral analysis. The remaining downgrade pressure for the Class B certificates is offset by the improving loan-to-value ratio as the certificates approach their maturity on June 20, 2020, with only $9 million currently outstanding. For the Class A certificates, we now assign two notches in our analysis for affirmation credit (that is, the likelihood that BA would reorganize if it became insolvent and choose to keep paying on these certificates to maintain use of the collateral aircraft) and four notches for collateral credit (the likelihood that repossession and sale of the aircraft collateral would be sufficient to repay the certificates and accrued interest). For the Class B certificates, we assign one notch of affirmation credit and four notches of collateral credit.

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We lowered our ratings on the 2019-1 Class AA and Class A certificates by one notch rather than two, because of the effect on our collateral analysis of BA's transition to speculative grade from investment grade, described above. In the case of the Class AA certificates, we now assign three notches of affirmation credit and four notches of collateral credit. For the Class A certificates we now assign two notches of affirmation credit and one notch of collateral credit.

Outlook

The negative outlook on BA is in line with that on IAG. In our view, IAG's financial metrics will be under considerable pressure over the next few quarters in the difficult environment. In addition, there is high uncertainty regarding the pandemic and economic recession, and their impact on air traffic demand and IAG's financial position and liquidity.

While we currently don't see liquidity as a near-term risk, we would lower the rating by at least one notch if management's proactive actions to cut operating costs and capital investments, and raise additional funds, are insufficient to preserve at least adequate liquidity, such that sources exceed uses by more than 1.2x in the upcoming 12 months. A downgrade would also likely follow if we expect that adjusted FFO to debt won't recover to at least 12% over 2021. This could occur if the pandemic cannot be contained, resulting in prolonged lockdowns and travel restrictions, or passengers remain reluctant to book flights. We could also lower the rating if industry fundamentals weaken significantly and for a sustained period, impairing IAG's competitive position and profitability.

To revise the outlook to stable, we would need to be confident that demand conditions are normalizing and the recovery is robust enough to enable IAG to partly restore its financial strength, such as adjusted FFO to debt increasing sustainably to at least 12%, alongside a stable liquidity position. We would expect this to be further underpinned by prudent capital spending and shareholder returns.

Air Baltic Corporation AS

Primary analyst: Aliaksandra Vashkevich

Our downgrade of Air Baltic, Latvia's national carrier, reflects the airline's weakening cash flow generation and mounting liquidity risk. We have revised our assessment of Air Baltic's SACP to 'ccc+' from 'b-' because, in our view, the airline is currently vulnerable and dependent on sufficient and timely support from the Latvian government to meet its short-term financial commitments.

We expect Air Baltic to report a shortfall in EBITDA in 2020 as the pandemic continues constraining air traffic. Air Baltic has cancelled up to 50% of its planned flights until November 2020 and postponed the launch of new routes for this summer season. The airline is currently undertaking multiple cost-savings measures, such as staff redundancies (of nearly 700 employees), reductions in capex (especially for growth), and early retirement of older aircraft. Compared with its European peers, Air Baltic has had low fuel hedges--up to 40% of the expected fuel consumption--which should benefit the airline once flights resume, taking into consideration the drop in crude oil prices. However, we do not expect cost-savings measures to be sufficient to offset the sharp decline in air traffic demand. That said, we forecast negative adjusted EBITDA for 2020, and don't expect it will improve to the 2019 level of about €102 million until 2022. Our adjusted debt to EBITDA ratio is likely to significantly exceed the 2019 level of 8.0x, absent government measures to restore the airline's capitalization.

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Air Baltic's majority shareholder, the Latvian government, has recently announced that it has approved an equity injection of €250 million for the airline, which is still subject to approval by the European Commission. The aid is expected to come in three tranches, with most of it expected this year. If the aid is approved, the government's share in Air Baltic will increase to 91% from about 80% at present.

Given that state aid hasn't yet been approved, we do not factor it into our base-case forecast or liquidity calculation. Therefore, we currently view Air Baltic's liquidity as weak, versus less than adequate after our assessment in March 2020. We estimate the airline had about €100 million in cash on hand as of March 31, 2020, which, considering the expected negative operating cash flows would not be sufficient to cover its upcoming lease payments and minimal capex needs over the next 12 months.

CreditWatch

We've kept the ratings on CreditWatch with negative implications to indicate that we could lower them further. We expect to resolve the CreditWatch as we gain more clarity on whether the proposed equity injection from the Latvian government will go ahead. Government funding in a form other than equity would underpin Air Baltic's currently unsustainable capital structure, which is already highly leveraged. We note that the documentation for the airline's outstanding €200 million senior unsecured notes has a covenant limiting the additional incurrence of debt of a significant amount.

Deutsche Lufthansa AG

Primary analyst: Aliaksandra Vashkevich

For our base-case forecasts, we assume that Lufthansa will obtain a state aid package amounting to €9 billion under the Federal Economic Stabilization Fund. We understand the state aid is in the final stages of negotiation with the German government and is subject to approval from the European Commission. We also understand it includes silent participation and a secured loan, and a minority stake in Lufthansa by the German government is also being considered.

Taking into account the anticipated close involvement of the German government, we now consider Lufthansa to be a government-related entity (GRE). Beyond the stabilization package, we see a moderate likelihood of extraordinary support for Lufthansa from the German government in a potential stress scenario. This translates into one notch of uplift from the airline's SACP, which we have reassessed to 'bb' from 'bbb-'. We base our view on our assessment of Lufthansa's important role for, and limited link with, the German government.

We revised our SACP assessment downward because, although Lufthansa is taking steps to mitigate the collapse in air travel demand in recent months, we expect this won't fully compensate for the sharp drop in revenue. In our view, Lufthansa's financial risk profile has deteriorated to the aggressive category, compared with significant in our previous review. Lufthansa has implemented cost-cutting, operating efficiency initiatives, and drastic capacity reductions, among others, and should benefit from lower fuel expenses (forecast at €3.0 billion-€3.5 billion in 2020 versus €6.7 billion in 2019). This is despite losses from ineffective fuel hedges (included in the fuel bill forecast) caused by lower fuel prices, and an over-hedged fuel position (after a significant cut in capacity), which we treat as an operating cost. We forecast negative adjusted EBITDA in 2020, which is considerably weaker than €4.7 billion of EBITDA in 2019 and our previous March 2020 base case of €2.4 billion. This, aggravated by working capital requirements, which could be

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material because of potentially higher ticket refunds or sluggish bookings, and partly offset by deferral of capex for new planes and maintenance, and suspension of dividends, will result in significantly negative FOCF. However, the expected €9 billion recapitalization package from the German government--comprising instruments that we could treat as equity after reviewing the final documentation--should help curb an accumulation of debt and support credit measures.

We envisage Lufthansa's operating performance improving in 2021, with adjusted EBITDA rising to €2.5 billion-€3.0 billion and adjusted FFO to debt rebounding but remaining well below its 2019 level of 32%. For these forecasts, we assume passenger traffic will start recovering later this year, benefits from structural cost-cutting measures and lower jet fuel price will feed through, and the airline's capital structure will be enhanced by an equity-like capital injection from the state. Nevertheless, low visibility on the evolution of the COVID-19 pandemic and recessionary trends means our forecasts are subject to significant risks.

Although we factor into our analysis expected financial results for 2020, particularly regarding capital structure, debt leverage, and liquidity, Lufthansa's credit metrics for 2020 are less meaningful to our assessment of financial risk. Because we believe that the state aid package will substantially enhance the airline's capacity to navigate through this difficult year, we focus mostly on expected 2021 credit ratios. This approach best reflects the airline's cash flow/leverage profile in our analytical judgment, assuming that air travel starts to recover late in 2020.

Factoring in the expected €9 billion state aid package from the German government and CHF1.5 billion loan guaranteed by the Swiss government, we expect Lufthansa's liquidity to remain adequate, with liquidity sources exceeding uses by more than 1.2x in the 24 months started March 31, 2020. As of that date, Lufthansa had liquidity of about €4.4 billion, including fully drawn credit lines. This compared with short-term debt of €1.0 billion, capex needs below €2.0 billion, and operating cash flow after operating lease payments that we forecast will be negative €1.0 billion-€1.5 billion, assuming ticket refunds of up to 50% of liabilities from unused flight documents of €4.1 billion as of Dec. 31, 2019. Lufthansa has no maintenance financial covenants in the documentation for its outstanding debt.

We now regard management and governance as satisfactory rather than strong, in line with rated peers such as IAG, easyJet, and Ryanair.

Our rating on Lufthansa's senior unsecured debt is now at 'BB+'. We assigned a recovery rating because we no longer rate the company in the investment-grade category. The '3' recovery rating indicates our expectation that lenders would receive meaningful recovery (50%-70%; rounded estimate: 65%) of the principal in the event of a payment default.

We lowered our issue rating on Lufthansa's junior subordinated debt (hybrid bond) to 'B' taking into account a three-notch deduction (including one for deferral risk) from the SACP. We are now notching down from the SACP instead of the issuer credit rating, since we view the potential government support as unlikely to apply to the hybrid. We also deducted two notches for subordination risk instead of one previously, since Lufthansa's SACP has moved to the speculative-grade category.

CreditWatch

We've kept our ratings on CreditWatch negative to indicate that we could downgrade Lufthansa in the coming 90 days, possibly by several notches, if the expected government support does not materialize.

A downgrade would also follow if we expect that the airline's financial profile will fail to recover in 2021. This could happen if we regarded the majority of the state aid package as debt according to

www.spglobal.com/ratingsdirect May 20, 2020 10 Six European Airlines Downgraded As COVID-19 Impact Erodes Credit Metrics; Majority Still On Watch Negative

our hybrid criteria, or if air traffic demand does not recover as we assume in our current base case and cost reduction does not sufficiently cover the revenue shortfall. We could also lower the rating if industry fundamentals weaken significantly for a sustained period, impairing Lufthansa's competitive position and profitability.

We could affirm our ratings if the state-aid package is concluded as expected. To assign a stable outlook, we would also need to be confident that demand conditions are normalizing and the recovery is robust enough to enable Lufthansa to restore its financial strength and a liquidity shortfall is remote.

As part of the CreditWatch resolution, we will also review the effect of the anticipated change in Lufthansa's capital structure on our issue ratings (including on the hybrid debt). easyJet PLC

Primary analyst: Frank Siu

Our downgrade reflects that, while easyJet has taken drastic cost reduction and deferred aircraft purchases, it will not be able to fully offset the sharp declines in air travel demand caused by the pandemic and the resulting impact on its earnings and debt level.

We estimate that easyJet's adjusted EBITDA will turn negative in financial year ending Sept. 30, 2020 (FY2020), from £984 million in FY2019. This includes a large amount of ineffective hedging losses caused by lower fuel prices and an over-hedged fuel position as it cuts capacity significantly. EBITDA shortfall, aggravated by working capital requirements, which could be material because of potentially low bookings or higher refunds to customers, will result in significantly negative FOCF and debt accumulation. This is why we have revised our assessment of easyJet's financial risk profile assessment to significant from modest, while removing the one-notch downward adjustment under our comparable rating analysis.

We envisage easyJet's financial performance will improve in FY2021, with adjusted FFO to debt potentially recovering toward 30%, which is still significantly below 180% in 2019. For these forecasts, we assume passenger traffic will start recovering later this year, benefits from structural cost-cutting measures and lower jet fuel prices will feed through, and the airline's net debt will start reducing. Nevertheless, low visibility on the evolution of the COVID-19 pandemic and recessionary trends means our forecasts are subject to significant risks.

Although we factor the financial results for FY2020 into our analysis, particularly regarding debt and liquidity, easyJet's credit metrics for FY2020 are less meaningful to our assessment of financial risk. Because we believe easyJet's liquidity and other characteristics should help it navigate through this difficult year, we focus mostly on expected FY2021 credit ratios (capturing the significant amount of debt accumulated during FY2020). This approach best reflects the airline's cash flow/leverage profile in our analytical judgment, assuming that air travel starts to recover late in 2020. easyJet has strong liquidity despite our expectations of significantly negative FOCF in FY2020. We understand the airline has sufficient liquidity to endure fleet grounding for at least nine months, subject to sale-and-leaseback transactions; this is not our base case however. easyJet had available cash of £1.4 billion as of March 31, 2020. Combined with about £410 million equivalent of drawn revolving credit facilities, a £600 million COVID-19 Corporate Financing Facility from Bank of England, and £400 million equivalent of secured term loans, we believe it has sufficient liquidity to cover its cash needs. We expect liquidity sources to exceed uses by over 1.5x for the 12 months started April 1, 2020. We also recognize that easyJet has the flexibility to reduce capex

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further by deferring aircraft deliveries and some aircraft maintenance if required.

CreditWatch

The rating remains on CreditWatch negative to indicate that we could lower our ratings on easyJet further. We expect to resolve the CreditWatch when we have a clearer view of how the pandemic and economic recession will affect air traffic demand and easyJet's financial position and liquidity.

While we currently don't see liquidity as a near-term risk, we would lower the rating by at least one notch if management's proactive actions to cut operating costs, reduce capital investments, and raise additional funds if necessary, are insufficient to preserve at least adequate liquidity position, such that sources exceed uses by more than 1.2x in the coming 12 months. A downgrade would also follow if we expect that adjusted FFO to debt will fail to recover to at least 23% over FY2021 (ending Sept. 30, 2021). This could occur if the pandemic cannot be contained, resulting in prolonged lockdowns and travel restrictions, or passengers remain reluctant to book flights. We could also lower the rating if industry fundamentals weaken significantly for a sustained period, impairing easyJet's competitive position and profitability.

To revise the outlook to stable, we would need to be confident that demand conditions are normalizing and the recovery is robust enough to enable easyJet to restore its financial strength such that adjusted FFO to debt improves and remains above 23%, and stabilize liquidity. We would expect this to be further underpinned by conservative capital spending and prudent shareholder returns.

Transportes Aereos Portugueses, SGPS, S.A. (TAP Air Portugal)

Primary analyst: Aliaksandra Vashkevich

Our downgrade of TAP Air Portugal, Portugal's national carrier, reflects the airline's weakening cash flow generation and deteriorating liquidity. We project a material shortfall in the ratio of liquidity sources to uses over the next 12 months. We have revised our assessment of TAP Air Portugal's SACP to 'ccc' from 'ccc+' because, in our view, the airline is currently vulnerable and dependent on sufficient and timely support from the Portuguese government to prevent a near-term payment default.

As of March 31, 2020, we estimate TAP Air Portugal's cash on hand at €250 million-€300 million compared with debt and finance lease amortization of about €60 million, plus €300 million-€350 million in rent obligations under operating leases over the next 12 months. Given the downward revision of our forecasts for the current year, we now view the airline, absent corrective actions, as being exposed to an increased risk of breaching the net leverage maintenance covenant on its senior secured bond on the July 2020 test date. A breach also appears likely for the following test date at the beginning of 2021, when the ratio is also tested on the other senior secured bond, considering the expected decrease in EBITDA this year.

The majority of TAP Air Portugal's fleet remains grounded amid the continuing COVID-19 health emergency. To adjust to the lower air traffic demand, the airline is implementing large capacity cuts on top of several measures to restore liquidity, such as suspension or delay of non-critical investments, renegotiation of commercial agreements and respective payment schedules, cuts of incidental expenses, suspension of staff recruitment and promotions, as well as temporary unpaid leave programs. TAP Air Portugal has also adopted a temporary work suspension of around 90% of

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its employees, which should result in a significant reduction of personnel costs. TAP Air Portugal also has lower fuel hedges than the majority of its European peers, which, given the drop in oil prices, should benefit the airline once flights resume. Nevertheless, we view these measures as insufficient to compensate for the significant drop in revenue and anticipate negative operating cash flow this year.

We still see a moderately high likelihood of extraordinary support for TAP Air Portugal from the Portuguese government, which results in two notches of uplift from the SACP level. Although the Portuguese government has not yet made a definitive public announcement on potential financial support for TAP, we factor into our analysis the track record of state aid to date, and the airline's importance to the government.

CreditWatch

We've kept our ratings on TAP Air Portugal on CreditWatch with negative implications to indicate that we could lower them further in the next 90 days. If it appears that TAP Air Portugal will not receive sufficient and timely government support, or potentially turn to alternative channels to improve its liquidity, which we would consider distressed, a multiple-notch downgrade is possible.

Turk Hava Yollari A.O. (Turkish Airlines)

Primary analyst: Frank Siu

We have affirmed our ratings on Turkish Airlines (THY) mainly because, in our view, THY has a more flexible cost base than other European airline peers. Given the collapse in global air travel demand, THY is undertaking drastic cost reductions at every level to preserve its credit standing. Unlike most European airlines, THY has only one labor union. Combined with government backing for 100% of salaries for furloughed employees, THY has more flexible labor costs than peers. Moreover, THY does not have an over-hedged fuel position or material hedging liabilities. We also expect its cargo segment, which represented about 15% of total revenue in 2019, to see stronger demand this year.

Overall, we expect THY to generate annual EBITDA of about $1.5 billion in 2020 and 2021, down from $2.5 billion in 2019. We forecast S&P Global Ratings-adjusted FFO to debt at 8%-10% in both years. However, we expect free cash flow to be significantly negative after deducting a finance lease repayment of about $1.2 billion, about $1 billion in net capex (excluding capex funded by sale-and-leaseback transactions), and about $250 million in interest payments (including related to finance leases).

We currently believe that THY has sufficient liquidity to withstand the impact of the pandemic in 2020. We view liquidity as adequate and estimate that sources will cover uses by about 1.2x for 2020. THY has about $2.5 billion of cash and about $460 million available on committed revolving credit facilities, which could cover about $1.7 billion of short-term debt maturities and about $1.2 billion of finance lease repayments. Ticket refunds could create additional cash outflows from working capital, and THY has high capex for new aircraft and the new Istanbul airport. Nevertheless, the airline has the flexibility to reduce capital spending if needed.

Enhanced Equipment Trust Certificates

We have lowered our issue rating on THY's 2015-1 Class A EETC by one notch to 'BB-'. This reflects

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our expectation of a moderately lower valuation on the B777-300ER aircraft as a result of the pandemic, and this increases our loan-to-value estimate. We rate THY's EETC two notches above our issuer credit rating. This includes one notch of affirmation credit (the likelihood that THY would reorganize if it became insolvent and choose to keep paying on these certificates to maintain use of the collateral aircraft), and one notch of collateral credit (the likelihood that repossession and sale of the aircraft collateral would be sufficient to repay the certificates and accrued interest).

Outlook

The negative outlook reflects high uncertainty regarding the pandemic and economic recession, and their impact on air traffic demand and THY's financial position and liquidity.

While we currently don't see liquidity as a near-term risk, we would lower the rating if THY unexpectedly loses access to state-owned bank funding to roll over short-term debt and fails to raise funds elsewhere, such that sources were insufficient to cover uses in the upcoming 12 months. A downgrade would also follow if we expected adjusted FFO to debt would average well below 6% in 2020-2021. This could occur if the pandemic cannot be contained, resulting in prolonged lockdowns and travel restrictions, or passengers remain reluctant to book flights.

To revise the outlook to stable, we would need to be confident that demand conditions are normalizing, and the recovery is robust enough to enable THY to restore its financial strength and stabilize its liquidity position.

Ryanair Holdings PLC

Primary analyst: Izabela Listowska

We continue to view Ryanair, Europe's largest airline by passenger volumes, as one of the financially strongest airlines in the industry, with low adjusted debt of only about €430 million as of March 31, 2020. In our view, Ryanair can navigate the extremely difficult operating conditions and dwindling earnings prospects. The airline is taking several steps to offset the collapse in air travel demand in recent months through cost-saving and operational efficiency initiatives, capacity reductions, and cash preservation measures (including deferral of growth capex and suspension of share buybacks). However, we don't think these will be sufficient to counterbalance the slump in revenue. This is why Ryanair's EBITDA and credit metrics will remain under considerable pressure during fiscal year ending March 31, 2021 (FY2021). In our view, these measures will contribute to Ryanair's financial recovery in FY2022, which will however largely depend on how the COVID-19 pandemic and recessionary trends evolve, and the ultimate impact on passenger volumes.

We anticipate Ryanair's revenue passenger kilometers will decline by 50% in FY2021. The revenue shortfall and partly fixed operating cost base, compensated to some extent by lower jet fuel prices, will compress earnings. We estimate that adjusted EBITDA will be about breakeven in FY2021, significantly below the about €1.5 billion in FY2020 (including a €407 million loss from ineffective fuel hedges) and our base-case projection in March 2020 of €0.8 billion. Based on Ryanair's hedged position--90% of the FY2021 fuel requirement is hedged at $606 per metric ton (/mt)--we do not expect it will benefit from the most recent drop in crude oil prices that pulled the jet fuel price down to below $200/mt in May 2020. Still, we assume a lower fuel bill for Ryanair in FY2021 versus FY2020, mainly because of capacity reduction and lower fuel usage. Our fuel forecast incorporates ineffective fuel hedges, which we treat as operating costs and deduct from EBITDA.

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We expect Ryanair will partly offset its shrinking revenue with strict cost cutting and capex reductions. We forecast that the airline will not take delivery of any new aircraft in FY2021 while reducing cash outflow to maintenance capex of €250 million-€300 million. This will compensate for its working capital requirements, which could be material because of potentially higher ticket refunds or sluggish bookings, while moderating the negative FOCF and net debt accumulation. In addition, we believe the airline will decrease capex for new planes in FY2022, allocating potential excess cash flows to reduce net debt instead of share buybacks, and thereby support recovery of credit measures.

We forecast that adjusted FFO to debt will deteriorate to just about breakeven in FY2021, versus more than 250% in FY2020 and our rating threshold of at least 45%. We believe however that Ryanair will be better positioned than some peers to capture the industry recovery and restore its credit measures to levels consistent with the current 'BBB' rating by FY2022. We envisage Ryanair's adjusted EBITDA rising to about €1 billion and adjusted FFO to debt exceeding 45%, assuming passenger traffic gradually improves later this year. However, in the current situation, our forecasts are subject to significant risks.

Although we factor the financial results for FY2021 into our analysis, particularly regarding debt and liquidity, our forecast credit metrics for Ryanair in FY2021 are less meaningful to our assessment of financial risk. We consequently focus mostly on expected FY2022 credit ratios since these best reflect the airline's cash flow/leverage profile in our analytical judgment, assuming that air travel starts to recover from late 2020.

The airline's liquidity remains strong despite the expected drop in cash flow generation. We forecast sources will exceed uses by 1.8x-1.9x in the 12 months started March 31, 2020, and by more than 1.5x in the following 12 months, assuming a substantial capex cut and no share buybacks. Ryanair had about €4.3 billion in cash on hand (including €0.5 billion from the U.K. government's COVID-19 Corporate Financing Facility due March 31, 2021) as of March 31, 2020, as well as industry leading unit costs, and a 90%-owned fleet, of which over 70% is unencumbered. The debt maturity schedule is well distributed, with the first large bullet payment in June 2021 when the €850 million unsecured bond is due. Ryanair has no maintenance financial covenants in the documentation for its outstanding debt.

CreditWatch

The CreditWatch negative status indicates that we could lower our ratings on Ryanair within the next 90 days. We expect to resolve the CreditWatch when we have a clearer view of how the pandemic and economic recession will affect air traffic demand, as well as Ryanair's financial position and liquidity.

While we currently don't see liquidity as a near-term risk, we would lower the rating by at least one notch if management's proactive actions to cut operating costs, reduce capital investments, and raise additional funds if necessary, are insufficient to preserve an at least adequate liquidity position, such that sources exceed uses by more than 1.2x in the coming 12 months. A downgrade would also follow if we expect that adjusted FFO to debt will fail to recover to at least 45% over FY2022 (ending March 31, 2022). This could occur if the pandemic cannot be contained, resulting in prolonged lockdowns and travel restrictions, or passengers remain reluctant to book flights. We could also lower the rating if industry fundamentals weaken significantly for a sustained period, impairing Ryanair's competitive position and profitability.

To revise the outlook to stable, we would need to be confident that demand conditions are normalizing and the recovery is robust enough to enable Ryanair to restore its financial strength, such that adjusted FFO to debt improves and remains above 45%, and liquidity stabilizes. We

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would expect this to be further underpinned by conservative capital spending and prudent shareholder returns.

SAS AB

Primary analyst: Aliaksandra Vashkevich

The ratings on Scandinavian regional carrier SAS reflect our view that there is a moderate likelihood that the airline will receive extraordinary support from the region's governments, with Sweden and Denmark cumulatively holding 29% of SAS' share capital. We now view SAS as playing an important role for the Scandinavian governments compared with our previous assessment of limited importance, and continue to assess the airline's link with the governments as limited. This translates into one notch of uplift from the company's SACP, which we now assess at 'b-' compared with 'b' previously.

We revised our SACP assessment because we now expect SAS to generate significantly lower adjusted EBITDA and post weaker credit metrics in financial year ending Oct. 31, 2020 (FY2020) than in our previous base case. This is due to the drop in air traffic demand in Scandinavia and globally, caused by the pandemic, not being sufficiently offset by the airline's ongoing initiatives. SAS has been taking steps to cope with the collapse in air travel demand in recent months. Among other measures, it has undertaken cost-saving and operating efficiency initiatives, capacity reductions, and cash preservation measures. However, we don't think these will be sufficient to counterbalance the slump in revenue. We expect that cost savings from the extensive personnel restructuring plan, which foresees up to 5,000 redundancies to adjust to reduced demand, will be seen only from FY2021, given the six-month notice period. We expect SAS' adjusted debt to EBITDA to increase significantly to more than 10x in FY2020 before reducing to 6.0x-7.0x in FY2021, which is still weaker than our previous projections.

SAS provides international and regional air connections to/from and within Scandinavian countries, which are otherwise less efficiently served by alternative modes of transport. SAS attracts a relatively high share of business traffic, including domestic commuters. Also, SAS is an important feeder for Denmark's main airport in Copenhagen, where it has the majority of its slots. The importance of SAS to Norway is underlined, among other things, by the military services it is contracted to provide for the Norwegian Armed Forces over the next four years, starting in 2020.

We assess SAS' liquidity as less than adequate because of significantly negative FOCF we forecast in FY2020. We expect SAS' liquidity sources will exceed uses by more than 1.0x-1.2x over the 12 months started April 30, 2020, thanks to state support. In addition to a Swedish krona (SEK) 3.3 billion revolving credit facility, 90% guaranteed by the Danish and Swedish governments and signed on May 5, we also incorporate in SAS' liquidity sources expected guaranteed funding from the Norwegian government of about Norwegian krone 1.7 billion. Additionally, we estimate that SAS had cash on hand of SEK4 billion-SEK5 billion, which, combined with the government-guaranteed funding, exceeds liquidity uses over the next 12 months. Those include debt maturities of SEK1.1 million (excluding IFRS 16 debt), estimated capex mainly in the form of prepayments of about SEK3.0 billion, and working capital requirements that could be material because of potentially higher ticket refunds or sluggish bookings.

CreditWatch

We've kept the ratings on CreditWatch negative to indicate the likelihood of a downgrade. We expect to resolve the CreditWatch once we have greater clarity regarding the adverse impact of the

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pandemic on SAS' financial position and liquidity and the airline's or governments' measures to limit it.

Related Criteria

- General Criteria: Hybrid Capital: Methodology And Assumptions, July 1, 2019

- General Criteria: Group Rating Methodology, July 1, 2019

- Criteria | Corporates | General: Corporate Methodology: Ratios And Adjustments, April 1, 2019

- Criteria | Structured Finance | General: Counterparty Risk Framework: Methodology And Assumptions, March 8, 2019

- Criteria | Corporates | General: Reflecting Subordination Risk In Corporate Issue Ratings, March 28, 2018

- General Criteria: Methodology For Linking Long-Term And Short-Term Ratings, April 7, 2017

- Criteria | Corporates | General: Recovery Rating Criteria For Speculative-Grade Corporate Issuers, Dec. 7, 2016

- Criteria | Corporates | Recovery: Methodology: Jurisdiction Ranking Assessments, Jan. 20, 2016

- General Criteria: Rating Government-Related Entities: Methodology And Assumptions, March 25, 2015

- Criteria | Corporates | General: Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, Dec. 16, 2014

- Criteria | Corporates | Industrials: Key Credit Factors For The Transportation Cyclical Industry, Feb. 12, 2014

- Criteria | Corporates | General: Corporate Methodology, Nov. 19, 2013

- General Criteria: Ratings Above The Sovereign--Corporate And Government Ratings: Methodology And Assumptions, Nov. 19, 2013

- General Criteria: Methodology: Industry Risk, Nov. 19, 2013

- General Criteria: Country Risk Assessment Methodology And Assumptions, Nov. 19, 2013

- General Criteria: Methodology: Management And Governance Credit Factors For Corporate Entities, Nov. 13, 2012

- General Criteria: Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings, Oct. 1, 2012

- General Criteria: Stand-Alone Credit Profiles: One Component Of A Rating, Oct. 1, 2010

- General Criteria: Use Of CreditWatch And Outlooks, Sept. 14, 2009

- General Criteria: Rating Implications Of Exchange Offers And Similar Restructurings, Update, May 12, 2009

- Criteria | Corporates | Industrials: Criteria For Rating Aircraft-Backed Debt And Enhanced Equipment Trust Certificates, Sept. 12, 2002

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Related Research

- Credit FAQ: Airlines And Airports Worldwide Confront An Unprecedented Plunge In Traffic And An Uncertain Recovery, April 6, 2020

- Ratings On European Airlines Lowered And Placed On CreditWatch Negative Due To Coronavirus Outbreak, March 20, 2020

- Coronavirus' Global Spread Poses More Serious Challenges For Airlines, March 12, 2020

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. A description of each of S&P Global Ratings' rating categories is contained in "S&P Global Ratings Definitions" at https://www.standardandpoors.com/en_US/web/guest/article/-/view/sourceId/504352 Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column. Alternatively, call one of the following S&P Global Ratings numbers: Client Support Europe (44) 20-7176-7176; London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm (46) 8-440-5914; or Moscow 7 (495) 783-4009.

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