United Airlines parent UAL Corp. and Continental Airlines Inc. saw their credit outlooks reduced to negative by Standard & Poor’s because of rising jet-fuel prices and the weak economy.
Both airlines kept long-term ratings of B, five steps below investment grade, even as the outlooks were cut from stable, S&P said Friday. Chicago-based United is the world’s second-largest carrier and the largest carrier at Denver International Airport, while Continental is fourth-biggest in the U.S.
UAL may post a 2008 pretax loss of more than $500 million, and Continental will report “materially worse” earnings and cash flow than in 2007 as the carriers spend more for fuel and business travel slows, S&P said. Jet fuel, the largest expense for most carriers, has climbed 85 percent in the past 12 months.
Continental, based in Houston, cut its 2008 and 2009 expansion plans Thursday as it reported a first-quarter loss of $80 million.
United has said it will detail a second round of capacity cuts when it announces results on Tuesday.
S&P cut its outlook for American Airlines parent AMR Corp. to negative from stable on March 24, also citing the slowing U.S. economy and rising fuel prices. Fort Worth, Texas-based AMR may report a 2008 loss of more than $1 billion, S&P said.
