Press Release: Fitch Affirms British Airways at 'BBB'; Outlook Stable

The following is a press release from Fitch Ratings Fitch Ratings-London-07 October 2026 Fitch Ratings has affirmed British Airways Plc's (BA) Long-Term Issuer Default Rating (IDR) at 'BBB'. The Outlook is Stable. The affirmation reflects BA's solid business profile, resilient performance through the Iran war to date and strongly positioned credit metrics for the Standalone Credit Profile (SCP). 0x.

A. (IAG) under our Parent and Subsidiary Linkage (PSL) Rating Criteria. The Stable Outlook reflects our expectation of credit metrics meeting or exceeding positive rating thresholds for the SCP and our unchanged assessment of IAG's creditworthiness. Key Rating Drivers Limited Impact from Iran War: BA's relatively limited exposure to the Middle East in terms of capacity and its strong transatlantic network has limited the impact from the Iran war.

For fuel prices, our base case assumes an average of USD87/barrel (bbl) in 2026 and jet crack spread averaging over USD60/bbl. 4 billion in 2025. BA's performance was aided by limited capacity growth and for the full year 2026 we assume no incremental capacity in the short term. 5x.

It is also maintaining its 12%-15% operating margin target. The group currently meets these targets. We have not assumed dividend payments out of BA in 2026, but this will likely resume from 2027. 5% decline in capacity.

0% increase in capacity. Unit revenues grew in all regions, but Asia Pacific and Africa and Middle East routes were the strongest performers with double digit percentage growth. Wider Industry Risks Remain: Our forecasts incorporate conservative assumptions to account for inherent risks in the airline industry, including air travel growth slowing and the potential for higher unit costs due to external factors. We expect EMEA air travel demand to continue growing at mid-single digits over the medium term.

As the situation around the Iran war is yet to be fully resolved, renewed hostilities or prolonged disruption to fuel supply, or fuel prices staying higher for longer, could have negative consequences for the airline sector, including BA. 9x in 2025 and we expect it to stay around this level over the medium term. 4x at end 2025 and we expect further improvement in our forecasts to around 1x. 0x over the next three years.

These metrics are near or better than the positive thresholds for the SCP. We may revise the SCP upwards with more visibility on industry conditions and the company's growth plans. Improving Financial Flexibility: Our rating case assumes growth in EBITDA leading to higher cash flow from operations (forecast to average over GBP3 billion a year over 2026-2028), which will enable BA to increase its share of self-funded fleet additions while posting positive free cash flow (FCF) and maintaining high liquidity. We expect the share of unencumbered fleet to continue growing to closer to 40% over the medium term.

Stronger Parent Benefits IDR: BA's IDR benefits from our assessment of linkages with a stronger parent. This is based on our assessment of 'Low' legal incentives, 'High' strategic and 'Medium' operating incentives for IAG to support its subsidiary under our PSL Criteria. We view BA's strategic importance to the group as stronger than other operating companies, given its stronger business profile and large contribution to the group.

Enhanced Equipment Trust Certificates 2018-1 Ratings: The affirmation of British Airways Pass Through Certificates 2018-1's class AA ratings at 'AA' reflects over-collaterisation enabling the tranche to pass the 'AA' stress case assumption with significant headroom. The rating on the class A 2018-1 certificates is constrained at 'A-'. The class A certificates' rating can be three notches above BA's IDR through a bottom-up approach, but we apply a cap at 'A-' for issuers rated in the 'BBB' category when using this approach. Peer Analysis BA's business profile compares well with those of Delta Air Lines, Inc.

(BBB/Stable), Deutsche Lufthansa AG (BBB-/Stable), Air France KLM SA (AF-KLM; BBB-/Stable) and American Airlines Group, Inc. (B+/Stable) due to BA's diversified route network, strong hub position at Heathrow, cash flow-generative routes to the US and rigorous cost management. Lufthansa and AF-KLM are BA's closest rated peers due to their strong hub position in Europe and diversified network. We view Lufthansa's and AF-KLM's business profiles as slightly stronger due to their bigger size and higher diversification in terms of business mix, geographies and activities/integration.

BA and Lufthansa have comparable financial profiles, with BA benefiting from lower leverage in gross terms. AF-KLM has a slightly worse financial profile. BA's SCP is in line with Lufthansa's and AF-KLM's ratings. However, its IDR benefits from one notch of parent support, resulting in a higher IDR for BA.

Compared with other rated European peers, such as Turk Hava Yollari Anonim Ortakligi (Turkish Airlines; BB/Stable), which has a similar business profile, BA benefits from lower foreign-currency risk exposure and substantially more stable home market conditions, driving higher debt capacity. Turkish Airlines' IDR is weaker than BA's SCP by two notches and is constrained at one notch above Turkiye's Country Ceiling. Among American peers, BA's credit metrics are closest to Delta Air Lines, which has a 1x gross leverage target, mid-teens operating margin target and strong FCF generation due to its relatively low capex profile and low interest expenses.

8% in 2026, 84% in 2027 and 85% in 2028 Yield growth of 5% in 2026, flat thereafter Unhedged jet fuel price at USD1,250/ton in 2026, USD900/ton in 2027 and USD800/ton in 2028. 2027 hedged price of USD860/ton and 43% hedged. Unit cost increase of 7% including fuel in 2026, -1% in 2027 and -3% in 2028 Assumptions for BA's 2018-1 EETC ratings Fitch's key assumptions within its rating case for BA include a harsh downside environment in which the airline declares bankruptcy, chooses to reject the collateral aircraft, and where the aircraft are remarketed amid a severe slump in aircraft values. Specific assumptions regarding value stress rates are below.

Fitch's analysis incorporates a 6% annual depreciation rate for Tier I aircraft and a 7% rate for Tier II aircraft. We have increased our depreciation-rate assumptions modestly, reflecting our updated analysis of historical aircraft value trends.

Tier and Value Stress Level Summary A320neo: Tier 1, 20% and 40% under 'A' and 'AA' level value stress scenarios, respectively B787-8: Tier 1, 30% and 50% under 'A' and 'AA' level value stress scenarios, respectively B787-9: Tier 1, 45% under 'AA' level value stress scenario The 40% stress rate for A320neo under 'AA' stress scenario reflects the fact that the aircraft are more fuel-efficient and technologically advanced than previous generations of narrow bodies and are a more popular aircraft type.

Corporate Rating Tool Inputs and Scores Fitch scored the issuer as follows, using our Corporate Rating Tool (CRT) to produce the Standalone Credit Profile (SCP) Business and financial profile factors (assessment, relative importance): management ('bbb', Lower), sector characteristics ('bbb', Moderate), market and competitive positioning ('bbb-', Moderate), diversification and asset quality ('bbb', Higher), company operational characteristics ('bb', Moderate), profitability ('bbb-', Higher), financial structure ('bbb', Higher), and financial flexibility ('bbb-', Moderate).

The quantitative financial subfactors are based on standard CRT financial period parameters: 20% weight for the latest historical year 2025, 40% for the forecast year 2026 and 40% for the forecast year 2027. The governance assessment of 'good' has no impact. The operating environment assessment of 'aa-' has no impact. The SCP is 'bbb-'.

To derive the Long-Term IDR Application of Fitch's Parent and Subsidiary Linkage Rating Criteria results in an uplift by one notch compared to the SCP. 0x Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade An upgrade of the IDR would require a higher SCP and a commensurate improvement in IAG's creditworthiness, with unchanged links between the two (MORE TO FOLLOW) Dow Jones Newswires October 07, 2026 07:44 ET (11:44 GMT) The statements in this document shall not be considered as an objective or independent explanation of the matters.

Please note that this document (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and (b) is not subject to any prohibition on dealing ahead of the dissemination or publication of investment research.