Kroll Bond Rating Agency (KBRA) is examining the widening impact of the new coronavirus (COVID-19) on travel-related industries, with commercial aviation poised to be one of the hardest hit sectors. The fast-evolving nature of the virus and its negative ramifications on passenger traffic, especially in China and increasingly in the rest of the world including North America and Europe, are credit negative developments for the commercial aviation industry.

While passenger traffic has rebounded after exogenous shocks to the industry, the unprecedented impact of the coronavirus—which has led to a significant on drop in passenger traffic globally—has placed airlines’ and lessors’ management teams with very challenging headwinds as information continues to emerge.

KBRA now estimates a wider adverse impact for airline revenues globally and is currently monitoring all our rated transactions that are affected by airline credits, including lessors (nine issuers) and other secured aviation transactions linked to airline credits (85+ transaction ratings). Based on the results of this review, KBRA may place specific ratings on Watch or change its Outlook to negative. In conjunction with its aircraft lessor and airline credit monitoring effort, dialogue will continue to be held with KBRA’s Aircraft ABS analysts regarding their surveillance observations to better inform credit views across both sectors.

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