International credit rating agency Standard & Poor’s (S&P) announced that it has upgraded Turkish Airlines’ credit rating from B to B+. At the same time, it was noted that the outlook for the rating has been confirmed as positive. This upgrade follows the increase in Turkey’s credit rating. S&P had previously raised Turkey’s long-term unrequested credit rating from B to B+ on May 3, 2024, and set its outlook as positive.
S&P’s decision to upgrade Turkish Airlines’ credit rating came in line with Turkey’s economic stabilization efforts and positive outlook. The credit rating of Turkish Airlines’ USD-denominated Equipment Trust Enhanced Certificates, issued in 2015, was also raised by four notches from B to BB+.
While maintaining its assessment of Turkish Airlines’ stand-alone credit profile (SACP) at ‘bb’, S&P expects the airline’s funds from operations (FFO) to debt ratio to decline from around 54% in 2023 to approximately 40% in 2024. The airline anticipates a 10% increase in capacity but faces significant labor cost inflation due to increased competition and low ticket prices.
The rating upgrade for Turkish Airlines reflects confidence in Turkey’s financial stability and economic efforts. However, potential risks should be evaluated considering geopolitical and macroeconomic uncertainties that could impact passenger demand. It was noted that the country rating for Turkey limits the rating of Turkish Airlines.
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