Fitch expects BAFS's uplift volume (the amount of fuel supplied to aircraft) to grow in 2013-2014, following an expected slight drop of 1% in 2012. The decrease in 2012 was due to the cancellation of certain long-haul flights from and to Europe, as a consequence of the economic crisis in Europe. Uplift volume growth over the next two years should be supported by domestic and regional economic growth while further downward pressure from Europe is likely to be limited.
BAFS is insulated from the volatility of fuel prices, as its revenues are derived solely from fuelling service fees while fuel is sold by oil companies to airlines. BAFS's major cost is its pre-agreed concession fee, which helps to keep profitability stable.
BAFS's current credit metrics provide significant rating headroom to support additional capex including investment relating to the expansion of SA. Fitch expects BAFS to maintain its fund flow from operations (FFO)-adjusted net leverage below 2.0x over the next two years, after taking into consideration the expected increase in capex.
What Could Trigger A Rating Action?
Positive: Future developments that may, individually or collectively, lead to positive rating
action include:
- Larger operating scale and more diversity of operations - both of which are unlikely over the next 12 to 18 months
Negative: Future developments that may, individually or collectively, lead to negative rating
action include:
- Larger-than-expected debt-funded investments, or high dividend pay-outs, leading to an increase in FFO-adjusted net leverage above 2.0x on a sustained basis