Fitch acts on airline EETCs

Fitch Ratings said it took various actions on aircraft-backed EETCs issued by Hawaiian Airlines, JetBlue Airways and Spirit Airlines. The rating actions are primarily driven by Fitch's April 10 downgrade of these U.S.-based carriers and by weakening levels of over-collateralization for some transactions.

Fitch said it lowered Hawaiian's 2013-1 class A certificates to BBB- from A-. “A sharp decline in appraised values for the A330-200 over the past year has caused the transaction to fail to pass Fitch's A or BBB level stress test,” the agency said in a press release.

Fitch also downgraded Hawaiian's 2013-1 class B certificates to BB+ from BBB-. “The downgrade follows Fitch's April 10 downgrade of Hawaiian's long-term issuer default rating (IDR) to B+ from BB-. The BB+ rating reflects a three notch uplift, driven by the affirmation factor and the presence of a liquidity facility,” Fitch said.

Fitch said it put JetBlue's 2019-1 class AA certificates on rating watch negative and affirmed the class A certificates at A. The rating watch on the class AA certificates reflects general uncertainty around asset values and airlines during the pandemic and acknowledges risks are elevated for ratings in the AA category.

“Ratings for the class AA and class A certificates are primarily based on a top-down analysis based on the value of the collateral. Both classes of certificates continue to pass Fitch's stress tests with maximum stress scenario loan-to-values (LTVs) in the low-to-mid 90% range,” the agency said.

Fitch also affirmed JetBlue's 2013-1 class A certificates at A+. “The 2013-1 transaction has amortized over time and remains highly over-collateralized, supporting the A+ rating,” Fitch said.

Finally, Fitch said it put Spirit's 2017-1 class AA certificates on rating watch negative and affirmed the 2017-1 and 2015-1 class A certificates at A.

“The rating watch on the class AA certificates reflects general uncertainty around asset values and airlines during the coronavirus downturn and acknowledges that risks are elevated for ratings in the AA category. The AA and A certificate ratings are based on Fitch's top-down methodology. The ratings reflect levels of over-collateralization that allow the transactions to continue to pass our AA or A level stress tests. Maximum stress scenario LTVs are in the low 90% range for the 2017-1 class AA certificates and in the mid-to-upper 80% range for the 2017 and 2015 class A certificates,” the agency said.

Fitch also downgraded Spirit's 2017-1 and 2015-1 class B certificates to BBB from BBB+. The one-notch downgrade reflects Fitch's April 10 downgrade of Spirit's IDR to BB- from BB. “The BBB ratings are derived through a two-notch uplift for a high affirmation factor, one notch for the presence of a liquidity facility and an additional notch for good recovery prospects,” Fitch said.

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