S&P cuts Southwest Airlines

Standard & Poor's said it lowered Southwest Airlines Co.'s corporate credit rating to BBB- from BBB and removed the ratings from CreditWatch, where they were placed with negative implications in September.

The outlook is stable.

The downgrade reflects Southwest's somewhat weaker financial profile after its $3.2 billion acquisition of AirTran Holdings Inc., parent of AirTran Airways Inc., which includes the assumption of AirTran's $3 billion of debt and leases, S&P said.

The May 2 acquisition was funded through equity issuance of $523 million and $518 million of Southwest's cash, the agency said.

The ratings on Southwest reflect its strong competitive position in the markets it serves, relatively low operating costs and consistent annual profitability, even during industry downturns, S&P said.

These factors mitigate the high-risk and cyclical nature of the airline industry and exposure to high fuel prices, the agency said.

The acquisition will weaken Southwest's financial profile somewhat, but it is expected to remain the strongest among U.S. airlines, S&P added.

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