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Fitch Ratings affirms IDR for United Continental Holdings, Inc.

Chicago: Fitch Ratings, a nationally recognized statistical rating organization (NRSRO) designated by the U.S. Securities and Exchange Commission, affirmed the Issuer Default Rating (IDR) for United Continental Holdings, Inc. (United, UAL) and its airline operating subsidiary, United Airlines, Inc. at 'BB'.

Higher fuel costs are masking otherwise positive performance at United. The company continues to show improvement in its operations. On-time performance rates and flight cancellations now rival the best operators among North American peers. Non-fuel unit costs have been flat through the first part of the year and the demand environment remains strong across almost all regions. Nonetheless, Fitch expects operating margins to decline for the third year in a row in 2018, primarily due to a sharp uptick in fuel prices. Assuming an average price of $2.25/gallon, Fitch expects United's total fuel bill to increase by more than $2 billion this year. Continued macroeconomic strength should allow much of the increase to pass to consumers, but fuel weighs heavily on margins in the near-term. The Rating Outlook is Stable. Fitch has also upgraded the class B certificates for United's 2014-2 and 2012-2 series of enhanced equipment trust certificates (EETCs) to 'BBB+' from 'BBB' and affirmed the ratings for United's other outstanding enhanced equipment trust certificates (EETCs). A full list of ratings is shown below.

The ratings affirmation reflects an improving unit revenue environment and United's solid operational and financial performance relative to peers over the past year, offset by weaker margins and credit metrics mainly driven by higher fuel costs. Fitch forecasts that credit metrics may deteriorate slightly in the near-term as the company works to pass higher fuel costs through to passengers, but metrics are expected to improve beyond 2018. Fitch calculates United's total adjusted debt/EBITDAR at 3.9x as of June 30, 2018 and expects leverage to drift slightly above 4x by year end. Fitch's expectations for medium-term adjusted leverage metrics in the mid-to-high 3x range, EBITDAR margins sustained in the upper teens, and prospects for improving FCF are all supportive of the 'BB' rating.

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Publication:Daily the Pak Banker (Lahore, Pakistan)
Date:Dec 8, 2018
Words:343
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