S&P alters Alaska Air view to negative

S&P said it revised its outlook for Alaska Air Group Inc. to negative from stable and affirmed the BB issuer rating.

On Sunday, the airline announced an agreement to buy Hawaiian Holdings Inc. for an enterprise value of $1.9 billion.

“We expect the proposed transaction to modestly benefit Alaska Air's market position but somewhat weaken its profitability metrics. If successfully completed, we expect the combined company's profitability would weaken relative to Alaska Air on a stand-alone basis.

“Hawaiian has not returned its business to profitability over the last few years, and we expect it to generate negative operating earnings in 2023 due to several challenges. These include a slower-than-expected ramp up of its international operations, increased competitiveness on the interisland routes, engine-related issues affecting its aircraft, and the Maui wildfires' effect on travel demand to the region,” S&P said in a press release.

The agency warned of a potential downgrade if it anticipates Alaska Air’s funds from operations to debt to stay below 30% on a sustained basis.

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