Etihad Airways awarded ‘A’ credit rating from Fitch, its first

Etihad Airways has received its first credit rating as it seeks to counter claims from US rivals that it benefits from state support.

The Abu Dhabi carrier yesterday welcomed the ‘A’ rating by Fitch and said its stable outlook would help it to raise funds in the future.

“This rating, which is based upon detailed analysis of our business performance and our strategy, will help international investors understand our story as we continue to expand our operations and raise additional external financing,” said James Hogan, Etihad’s president and chief executive.

The credit rating reflected Etihad’s “extensive network, strong market position, favourable geographic hub location poised for growth and cost advantage”, Fitch said.

“We assess the legal ties between Etihad and Abu Dhabi to be limited, as Etihad does not benefit from cross-default provisions and/or guarantees,” said Fitch about the airline’s relationship with Abu Dhabi’s Government, its sole shareholder.

“The inclusion of any of these provisions would strengthen the linkage and would likely to be positive for the rating.”

Fitch said Etihad was important to Abu Dhabi because of its contribution to the emirate’s tourism industry, which is part of the Abu Dhabi 2030 Economic Vision to diversify its economy away from hydrocarbons.

Etihad contributed about US$15.6 billion to Abu Dhabi’s economy in 2013, or about 6 per cent of the UAE’s GDP, said Fitch, citing a report by Oxford Economics.

The credit ratings agency said the carrier’s credit metrics were “negatively impacted” in 2013 and last year because of high capital expenditure and acquisitions that pressured monetary yields.

But Fitch said it believed that Etihad had reached a more “mature stage” of its business that would allow it to focus on profitable growth.

Nevertheless, Etihad’s main challenge is competition from Arabian Gulf carriers – namely Emirates and Qatar Airways, whose aviation centres share a favourable geographic location as Etihad.

Even so, Etihad’s main advantages are the United States pre-clearance facility in Abu Dhabi and its great connectivity to Europe and India.

Fitch expects the slump in oil prices to be reflected in Etihad’s financial performance from next year, or “once the share of fuel consumption hedged at higher prices begins to diminish”.

Last week, Etihad said its net profit last year rose 52 per cent from 2013 to $73 million, while its revenue rose 26.7 per cent to $7.6bn.

The airline said it had raised more than $11bn in long-term funding through the global financial markets since 2003, including $3.7bn last year to finance its debt.

It said it had repaid about $5bn of its debt since 2003, including $800m last year.

Meanwhile, Emirates listed a $913m sukuk on Nasdaq Dubai, increasing the value of Emirates’s sukuk on Dubai exchanges to $34.96bn, said the airline yesterday.

Separately, Etihad, Emirates and Qatar Airways are gaining support in the US over the open skies row.

On Tuesday, US budget carrier JetBlue sent a letter to the US secretaries of state, commerce and transport, urging them to keep the open skies deal intact.

“Just as the three US legacy carriers currently alleging unfair subsidies have exhibited anti-consumer behaviour domestically, they have relied upon their immunisation from antitrust laws, granted by the department of transport to thwart competition internationally,” it said.

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