Moody's downgrades Airports Company but the operator says it has stabilised its financial position

The empty departure room at the O.R. Tambo Airport. Photo: Reuters
The empty departure room at the O.R. Tambo Airport. Photo: Reuters
  • Moody's has downgraded some of ACSA's credit ratings.
  • Travel restrictions which mean cash flows shocks for airport operators are largely behind the downgrade.
  • ACSA says it has revised its financial plan to better prepare for this "new normal".
  • It has negotiated with its key lender not to call a default until 30 June 2022 and has secured additional resources to give it enough liquidity for the next 12 months.


Credit ratings agency, Moody’s has downgraded some of the Airports Company South Africa (ACSA) notes and changed the company's outlook to negative as coronavirus (Covid-19) induced travel restrictions continue to wreak havoc on the aviation industry and the airport sector.

Moody's which began the review process on ACSA on 31 March 2020 said the airports operator's exposure to a "very weak carrier base" and weak economic environment in SA spells a future with reduced cash flows which will increase the company's debt burden and result in a material weakening of its credit metrics.

As a result, Moody's downgraded the company's corporate family rating to Ba2 from Ba1 and also lowered its national scale rating to Aa3.za from Aa2.za.

"The airport sector has been one of the sectors most significantly affected by the shock, given its exposure to travel restrictions and sensitivity to consumer demand and sentiment," read Moody's statement. "Today's action takes account of the impact on ACSA of the breadth and severity of the shock, and the broad deterioration in credit it triggered."

The agency said that ACSA's traffic has been severely impacted by the travel restrictions and while it expects flight activity to gradually increase in the second half of 2020 as restrictions are eased, passenger volumes are unlikely to go back to pre-Covid-19 levels. It added that following the past financial crisis, it took seven years for ACSA's traffic to recover to the pre-crisis levels.

ACSA said its financial performance has indeed been severely impacted by the travel restrictions and the combined credit effects of these is unprecedented. But it said in response, it has revised its financial plan in line with its "new normal" scenario anticipating that the impact on traffic volume demand and airline sustainability will be long-term.

"The revised financial plan includes significant responses to mitigate the impact of the traffic volume decline anticipated. These include deep reductions in operational expenditure and limitations to capital expenditure," said ACSA in a statement.

It said it has made significant progress in implementing plans to secure funding and to ensure its immediate sustainability. It has received approval from its key lender, L’Agence Francaise De Developpement (AFD), to waive its right to call a default until 30 June 2022. It also got approvals for extension of its banking facilities from R1.5 billion to R3 billion for a period of 12 months which it said will provide enough liquidity for the next 12 months.

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