KBRA releases research that examines the various levels of sovereign assistance to the aviation sector as a result of the COVID-19 economic disruption. The pandemic provided a lens on a credit theme that KBRA has highlighted in aviation, namely, that sovereign support can be a meaningful input into an airline’s credit profile. Given airlines’ importance in the economy—including global and domestic connectivity, their role in preserving jobs and supporting related sectors—many sovereigns provided domestic airlines with tangible financial support during the pandemic. While there was an uptick in financially distressed airlines, restructurings and liquidations did not universally occur.

Key Takeaways

• The global nature of airline operations and their key role in domestic economies and national pride are characteristics that warrant special credit considerations compared to other obligors in an economy.
• The pandemic provided a good test case of sovereigns’ ability and willingness to support airlines, with a range of outcomes observed.
• While in some jurisdictions capacity to support was severely weakened by pandemic conditions, the ability and willingness to support airlines in the future may be more manageable.

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About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU, and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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