Rating Action: Moody's downgrades JetBlue's 2019-1 EETC: Class AA to A2, Class A to Baa1
Global Credit Research - 31 Jul 2020
New York, July 31, 2020 -- Moody's Investors Service ("Moody's") downgraded its ratings of JetBlue Airways Corp.'s ("JetBlue") Pass Through Certificates, Series 2019-1; Class AA to A2 from A1, Class A to Baa1 from A3. (together, "the Certificates"). JetBlue's Ba2 corporate family rating ("CFR") and negative outlook on all of Moody's ratings of JetBlue are unaffected by this rating action.
The certificates are collateralized by 25 Airbus A321ceo (current engine option) aircraft delivered new to JetBlue in 2017 or 2018. The downgrades consider Moody's projected loan-to-value for each tranche which increases over the transaction's life based on the modest amortization of the pool balances and Moody's projections of future values of the aircraft, balanced by the importance of the A321 narrow-body aircraft to JetBlue's long-term fleet plan.
The ratings reflect the credit quality of JetBlue; the typical benefits of Enhanced Equipment Trust Certificates (EETCs), including the applicability of Section 1110, cross-default and cross-collateralization of the equipment notes; 18-month liquidity facilities provided by Credit Agricole CIB, New York Branch; and cross-subordination pursuant to the Intercreditor Agreement.
The ratings also reflect Moody's opinion that the A321s in the transaction will remain important to JetBlue's long-term network and fleet strategy, which increases the likelihood of the company affirming the transaction under a reorganization scenario. JetBlue's current fleet includes 63 A321ceos and ten A321neos. Its Series 2019-1 EETC is collateralized by 25 of the A321ceos with an average age of about 2.5 years. The company's orderbook includes 76 A321neos and 70 Airbus A220s. Deliveries of the A321s are currently scheduled through 2024; however, Moody's believes the schedule is likely to be delayed because of the impacts of the coronavirus. The young age of the aircraft and the relatively large proportion relative to the total A321 fleet informs Moody's view that JetBlue would affirm the transaction in a reorganization scenario.
Moody's current estimates of the peak loan-to-values before priority claims for repossession and remarketing costs and of liquidity providers ("LTV") for the Class AA and Class A are about 64% and 75%, respectively. The LTV profile of the Class AA is upward sloping, with Moody's projected LTV steady at about 55% through 2025, then increasing to 65% at the final scheduled payment date in May 2032. The amortization profile of the Class A is modestly upwards sloping, from 72% currently, to about 76% at its final scheduled payment date in May 2028. Moody's uses a 5% annual rate of decline and a 1% inflation rate when projecting the current market value of A321ceo aircraft. Moody's estimates the current aggregate market value of the 25 aircraft at about $1.035 billion, and projects declines to about $760 million in November 2025 and to about $380 million at scheduled maturity in May 2032.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Changes in the EETC ratings can result from any combination of changes in the underlying credit quality or ratings of JetBlue, Moody's opinion of the importance of aircraft models to the airline's network, or Moody's estimates of aircraft market values, which will affect estimates of loan-to-value.
The methodologies used in these ratings were Passenger Airline Industry published in April 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1091811, and Enhanced Equipment Trust and Equipment Trust Certificates published in July 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1125852. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.
..Issuer: JetBlue Airways Corp.
....Senior Secured Enhanced Equipment Trust, Series 2019-1, Class AA, Downgraded to A2 from A1
....Senior Secured Enhanced Equipment Trust, Series 2019-1, Class A, Downgraded to Baa1 from A3
JetBlue Airways Corp., based in Long Island City, New York, operates a low-cost, point-to-point airline from its primary focus cities -- New York from John F. Kennedy International airport, Boston, Fort Lauderdale and Los Angeles. JetBlue serves more than 100 cities with an average of more than 1,000 daily flights. Revenue was $8.1 billion in 2019 and $5.9 billion in the last 12 months ended June 30, 2020.
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.
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Jonathan Root, CFA Senior Vice President Corporate Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Russell Solomon Associate Managing Director Corporate Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653
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