S&P raises credit rating on Delta Air Lines

S&P raises Delta credit rating, citing earnings and shrinking debt

Associated Press

NEW YORK (AP) -- Standard & Poor's Ratings Services raised its credit rating on Delta Air Lines Inc. Friday, pointing to Delta's improving financial position and its spending plans.

Standard & Poor's said Delta's financial profile is getting better, because its earnings are healthy and its spending in recent years has been moderate. S&P expects both of those trends to continue. The upgrade comes two days after Delta said it will start paying dividends again, and plans to return $1 billion to shareholders through those dividends and a stock buyback.

The firm upgraded Delta's credit rating to 'B+' from 'B'. That is still "junk" or noninvestment grade, four notches below investment grade. The outlook is stable.

Delta said it will pay a quarterly dividend of 6 cents per share starting in September. It also plans to buy back $500 million of its stock by mid-2016. Those investor-friendly moves are unusual for airlines. Southwest Airlines Co. is the only other large U.S. airline with a dividend, paying a penny per share.

Standard & Poor's said it is normally risky for airlines to return cash to shareholders, but Delta should be able to make those moves while continuing to improve its credit measurements because its cash flows are getting stronger, its spending is moderate, and its debt is shrinking.

Delta has posted a profit for three straight years and trimmed its debt by $5 billion. Delta last paid a dividend in 2003, and before it reorganized under bankruptcy protection between 2005 and 2007.

The company expects to achieve about $7 billion in adjusted debt over five years. Standard & Poor's said that is about $3 billion below Delta's previous target and $5 billion below its current levels.

Shares of Delta rose 43 cents, or 2.4 percent, to close at $18.13. In after-hours trading the stock fell 13 cents to $18. Delta shares have traded between $8.42 and $18.88 in the last year.

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