American credit agency Fitch has handed Virgin Australia a vote of confidence by maintaining its “B+/Stable” rating, despite the carrier’s poor recent share performance.
Analyst Kelly Amato praised the brand’s cost reduction drives, which included cutting seven A320s from its Tigerair brand, and acknowledged it had $1.1 billion cash at hand at the end of last year.
The agency said, “Fitch believes Virgin Australia will be able to withstand additional liquidity pressures under the worst-case scenario presented by [the International Air Transport Association] until late-2020, based on its reported levels of liquidity.
“And measures announced to address falls in demand already experienced as a result of COVID-19 only.
“We believe that the reduction in costs already achieved under its strategic cost-reduction program has increased the resilience of the airline’s cost base and has given it more time to implement these actions.”
Two weeks ago, Australian Aviation reported how the airline plans to dramatically reduce its fleet by cutting seven A320s from its Tigerair brand by October 2020.
The news came on the same day Virgin Australia chief executive Paul Scurrah announced a $97 million half-year loss, and added the coronavirus outbreak would have a “significant effect” on the business.
Tigerair will soon operate just eight aircraft, less than half the number it had in its ranks two years ago.
Scurrah said in a statement, “I’m pleased we can accelerate the transition of Tigerair to an all Boeing 737 fleet, which will help get the business into a better financial position moving forward.”