By Rajesh Kumar Singh
CHICAGO (Reuters) - Fitch Ratings on Tuesday upgraded Delta Air Lines (NYSE:DAL)' credit rating to investment grade, citing improvements in its balance sheet in the past three years.
The Atlanta-based carrier's rating was cut to junk during the pandemic when a slump in air travel brought the industry to its knees. A junk credit rating makes it harder and more expensive for companies to raise capital.
After the pandemic, Delta has been focusing on paying down debt and getting back its investment-grade rating.
Fitch upgraded Delta to 'BBB-' from 'BB+' with a stable outlook. The carrier also has an investment grade rating from Moody's (NYSE:MCO), but S&P rates it in junk territory.
Fitch said Delta's credit metrics have improved considerably after the pandemic as it has reduced its gross debt and operating leases by roughly $11 billion in the past three years.
It said travel demand will remain healthy through 2024, helping Delta generate free cash flow. It expects the company to reduce unencumbered assets to $30 billion by the end of the year.
Delta forecast last Thursday a lower-than-expected third-quarter profit as excess industry capacity has dampened airfares at the low end of the market.
Fitch, however, said it expects Delta to remain among the most profitable airlines, citing a pickup in corporate travel bookings and sustained demand for premium travel.