Standard& Poor's Ratings Services affirmed its "B" corporate credit rating on United Continental Holdings, parent of United Air Lines and Continental Airlines, with the view that the carrier's operational and financial profile will continue to improve.
It also raised the issue ratings on the Chicago-based Star Alliance carrier's senior unsecured debt and second-lien secured debt to "B", equal to the corporate credit rating, from "B-". The ratings agency also revised its recovery rating on that debt to "4" from "5".
The outlook is stable reflecting S&P's view that credit measures "will improve in 2013", but not likely to levels sufficient to support an upgrade.
S&P anticipates United Continental will report a net loss this year, after substantial merger-related special charges of several hundred million dollars, but to return to profitability next year.
The ratings agency views the company's "substantial" market position as the "largest US airline with a broad route network" as a positive. However, it views United Continental's business risk profile as "weak", its financial profile as "highly leveraged" and its liquidity as "adequate."
The company ended the third quarter with $7.2 billion in liquidity. "This is about 19% of trailing-12-months revenues, lower than in previous quarters this year, but still similar to the like ratio for other large 'legacy' US airlines."
United Continental has paid down debt during the past year "improving its asset coverage", notes S&P.