Alaska Air Group Inc.‘s 2020-1B raised to ‘BBB+’ from ‘BBB’ on improved collateral coverage; 2020-1A affirmed

Dec 15, 2023

S&P Global Ratings today raised its issue-level rating on Alaska Air Group Inc.'s 2020-1 Class B enhanced equipment trust certificates (EETC) to 'BBB+' from 'BBB'. This was driven by a higher collateral credit score because scheduled debt amortization and steady asset valuations resulted in an improvement in the loan-to-value (LTV) of this instrument.

We also affirmed the 'A+' issue-level rating on the 2020-1 Class A EETCs. While the LTV on Class A EETCs has also improved amid ongoing debt amortization, it didn't result in an upgrade. This is because we had previously applied a positive comparable rating analysis (CRA) to reflect our view that collateral credit was borderline and likely to improve further. With the improvement in LTV, the collateral credit on the Class A certificates is now in line with the level for its rating, and therefore we no longer apply the positive CRA.

CurrentPrevious


EETC issue	Affirmation credit	Collateral credit	CRA	Rating	Affirmation credit	Collateral credit	CRA	Rating
Alaska Air Group 2020-1A	3	4	-	A+	3	3	1	A+
Alaska Air Group 2020-1B	2	2	-	BBB+	2	1	-	BBB

Our analysis of EETCs typically starts with our issuer credit rating on the airline that operates the aircraft. It adds any applicable notches for the likelihood that an airline will successfully reorganize in bankruptcy and continue to make payments on the EETC (which we call "affirmation credit"). We may adjust--by reducing those notches--for any adverse legal considerations that may arise from the jurisdiction in which the airline operates. For EETCs, we may also add notches for the likelihood that repossession and sale of the aircraft collateral will be sufficient to repay principal and accrued interest, avoiding a default, if the airline does not reorganize or rejects the aircraft securing the certificates (which we call "collateral credit"). Various other, more specialized aspects, such as ratings of the liquidity provider for an EETC, can also affect the rating outcome.

We could raise or lower EETC ratings based on a revision of our issuer credit rating on Alaska Air (BB/Negative) or on changes in our assessment of other above-outlined elements.