Lufthansa Rating Lowered To 'BB' On Increased Leverage; Outlook Negative

Lufthansa's shareholders and the European Commission have approved a €9.0 billion state aid package that we believe will significantly boost Lufthansa's liquidity but result in weaker credit metrics than commensurate with the 'BB+' rating, since we regard most of the state aid package as debt. Furthermore, we expect a steeper drop in Lufthansa's EBITDA and a higher cash flow deficit in 2020 because of a likely slower rebound in long-haul passenger traffic, expected sluggish corporate and business travel, and weakened demand for the airline's maintenance, repair, and overhaul (MRO) services. We are therefore lowering our ratings on Lufthansa and its senior unsecured debt to 'BB' from 'BB+' and our ratings on the junior subordinated debt to 'B-' from 'B'. The

...July 1, 2020 - Lufthansa's shareholders and the European Commission have approved a 9.0 billion state aid package that we believe will significantly boost Lufthansa's liquidity but result in weaker credit metrics than commensurate with the '##+' rating, since we regard most of the state aid package as debt. - Furthermore, we expect a steeper drop in Lufthansa's EBITDA and a higher cash flow deficit in 2020 because of a likely slower rebound in long-haul passenger traffic, expected sluggish corporate and business travel, and weakened demand for the airline's maintenance, repair, and overhaul (MRO) services. - We are therefore lowering our ratings on Lufthansa and its senior unsecured debt to '##' from '##+' and our ratings on the junior subordinated debt to 'B-' from 'B'. The 'B' short-term issue credit rating is unchanged. We removed the ratings from CreditWatch negative, where we placed them on March 20, 2020. - The negative outlook reflects our view that Lufthansa's financial metrics...

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