Fitch upgrades Turkish Airlines’ credit rating to BB, securing stable outlook
A Turkish Airlines plane takeoff from San Francisco International Airport (SFO) in San Francisco, California, U.S, on Aug. 31, 2024. (AA Photo)
U.S.-based credit rating agency Fitch Ratings upgraded Turkish Airlines’ Long-Term Foreign and Local-Currency Issuer Default Ratings (IDRs) on Wednesday, which assess an entity’s ability to meet its long-term financial obligations in both foreign and local currencies, from BB- to BB, while maintaining its outlook as “Stable.”
The agency also raised Turkish Airlines’ Standalone Credit Profile (SCP) from BB- to BB, which measures a company’s creditworthiness based solely on its financial strength, without considering external support. Fitch reflected expectations that the airline’s credit metrics will remain at more favorable levels than previously anticipated, according to the report.
Additionally, Fitch reaffirmed the BB+ rating on Turkish Airlines’ U.S. dollar-denominated Enhanced Equipment Trust Certificates (EETCs) issued in 2015. EETCs are a form of secured financing used by airlines to fund aircraft purchases, with the aircraft serving as collateral.
Fitch expects high earnings from Turkish Airlines
Fitch noted that Turkish Airlines’ financial performance is expected to normalize between 2024 and 2027 following a strong post-pandemic recovery, during which the carrier’s earnings exceeded pre-pandemic levels.
The agency forecasts annual revenue growth in the high single digits, primarily driven by capacity expansion. However, pricing benefits—both for passenger and cargo operations—are expected to be minimal.
Despite the projected revenue growth, profit margins are likely to come under pressure due to ongoing supply chain disruptions and rising costs, including personnel, airport fees, and handling expenses.
Fitch also highlighted that Turkish Airlines maintains a stronger business profile compared to its domestic competitor, Pegasus Airlines.
Fitch emphasized that Turkish Airlines benefits from a larger fleet, broader geographic reach, significantly stronger market position, and more diversified revenue base, noting that these factors also contribute to its moderately higher debt capacity compared to Pegasus within the same rating category.
