Standard & Poor’s may lower credit ratings of 14 aerospace-related companies because a looming war with Iraq is likely to hurt the commercial airline industry.
Shares in European Aeronautic, Defense & Space Co., the main owner of planemaker Airbus SAS, fell as much as 5.4 percent at yesterday’s close.
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S&P placed ratings of airplane manufacturers, aircraft systems and component suppliers and aviation-services companies on CreditWatch with the possibility of downgrades because of the adverse effects on travel and the economy of a possible war with Iraq, the ratings company said in a statement.
The ratings company said yesterday it may lower its ratings of 11 airlines. U.S. aviation regulators said yesterday that U.S. airlines will need at least two years longer than previously expected to recover from a recession and terrorist attacks. They predicted further delays might result from a war in Iraq.
Passenger traffic is expected to reach pre-Sept. 11 levels in 2006 instead of 2004 and airlines will need until 2015 instead of 2013 to top 1 billion passengers, according to the Federal Aviation Administration’s annual forecast.
Companies placed on CreditWatch include EADS, Boeing Co. and its Boeing Capital Corp. division, Goodrich Corp., Argo-Tech Corp., AAR Corp. and Sequa Corp., as well as Britax Group Plc, Dunlop Standard Aerospace Holdings Plc, Hexcel Corp., K&F Industries Inc., Sabreliner Corp., Textron Inc., Textron Financial Corp. and TransDigm Inc., S&P said.
EADS in February sold 1 billion euros of seven-year bonds to refinance existing debt. The 4.625 percent bonds were originally priced to yield 4.64 percent, or 0.97 percentage point more than the mid-swap rate, a benchmark for corporate borrowing. S&P has an A rating on the debt.
Airbus, the world’s second-biggest planemaker, has been targeting 300 aircraft deliveries for 2003, in line with the 303 deliveries of 2002. Chief Executive Noel Forgeard has said a protracted war in Iraq would further crimp demand for air travel and may lead some airlines to cancel or defer plane deliveries,
making the 300 target impossible.
Boeing, the world’s biggest planemaker, plans to deliver 280
aircraft in 2003. The Chicago-based company would be similarly affected by a prolonged war in Iraq. S&P rates Boeing’s long-term debt A+.
In addition, S&P changed its outlook on Kaman Corp., Precision Castparts Corp. and Aerostructures Corp. to negative, which means it is more inclined to reduce these companies’ credit ratings, it said.
Bloomberg News
