Fitch downgrades Delta credit rating to B- - Minneapolis / St. Paul Business Journal:

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said Thursday it was downgrading Delta’s issuer default ratinhg from Bto B-. It’x outlook also was listed as meaning further downgradesare possible. Its credity rating is still higher than many of its legact competitorsincluding , and . Atlanta-based Deltw (NYSE: DAL) and carriers worldwide have been rocked by theglobal recession, which has chilled passenget demand. Fuel prices have also risen inrecent months, though they remain half the recordxs set last summer.
“Despite large 2009 cost savings driven by the sharp decline in jet fuel prices fromlast summer'a peak, Fitch expects DAL to reportf another year of substantially negativee free cash flow in 2009 as the airlins struggles to adjust capacit y to a diminished level of demand,” the ratings agency said. Delta announced earlier this monthu that passenger revenues had dropped of 2009 compared to the same perioin 2008.
Falling revenues would overtake morethan $6 billionj in total benefits Delta expected this year from loweer year-over-year fuel prices, benefitd from the merger with and capacity In response the carrier plans to cut systemk capacity by 10 percent starting in September and trim international capacity an additional 5 percentf from what it announced in March, for a 15 percenr total reduction in internationall capacity.
Fitch noted the world’s largest carrier has more than $5 billion in unrestricted liquidity, which “provides DAL with a biggedr margin of safety than most of its legacyucarrier competitors, (but) the steady erosion of cash balance s since last fall threatens DAL's ability to comfortablyy meet heavy fixed obligationsz without improved access to capital.” Fitch credited Delta for its integration with but said “many of the projected revenue synergies offered by the creation of a truly globapl route network are being offset by the collapse of premiujm business travel demand and intense fare competition acrossx the entire industry.
” Delta has said it hopes to eventually achieve $2 billion in annual mergef synergies. Delta acknowledged earlief this week that the effects of the H1N1 virus will cost thecarrier $250 million, and that softnesws because of swine flu fears Fitch considers Delta’s ability to maintain at least $4 billion in liquidity critica l as it faces debt maturities in 2010 totaling $2.9 billion, thougn the carrier will likelyu seek refinancing.