On Tuesday, Fitch Ratings upgraded Delta Air Lines' credit rating to investment grade, citing improvements in the company's balance sheet over the past three years.
The Atlanta-based airline had its rating downgraded to junk status during the pandemic due to the sharp decline in air travel demand that impacted the industry. A junk credit rating makes it harder and more expensive for a company to raise funds.
Since the pandemic, Delta Air Lines has been focused on repaying debt and restoring its investment-grade status.
Fitch upgraded Delta's rating from "BB+" to "BBB-", with a stable outlook. The company also has an investment-grade rating from Moody's, but S&P still rates it as junk.
Fitch stated that Delta has significantly improved its credit metrics since the pandemic, reducing total debt and operating leases by approximately $11 billion over the past three years.
Fitch believes that travel demand will continue into 2024, which will help Delta generate free cash flow. The company is expected to reduce unencumbered assets to $30 billion by the end of the year.
Last Thursday, Delta predicted its third-quarter profit would be lower than expected due to industry overcapacity driving down fares in the low-end market.
Nevertheless, Fitch expects Delta to remain among the most profitable airlines, noting a rebound in corporate travel bookings and ongoing high-end travel demand.
