New York, July 15, 2019 -- Moody's Investors Service ("Moody's") has assigned ratings to British Airways, Plc's new Pass Through Certificates (EETCs), Series 2019-1 to be issued by British Airways Pass Through Trust 2019-1AA and British Airways Pass Through Trust 2019-1A, respectively: $542.971 million Class AA at Aa2 with scheduled final payment date of December 15, 2032 and legal final maturity date of June 15, 2034 and approximately $263.908 million Class A at A3, with scheduled final payment date of June 15, 2029 and legal final maturity of December 15, 2030 (together, the "Certificates"). The Baa3 Long-Term Issuer Rating for British Airways and the positive outlook are unaffected by this rating action. The outlook for the trusts issuing the Certificates is stable.

The Certificate proceeds will help fund the purchase of eight aircraft newly-manufactured for British Airways scheduled to deliver between July 2019 and May 2020. The transaction is a US dollar-denominated, Japanese operating lease structure with features like those in each of the EETC transactions that have come to market since 2009. The transaction will be subject to insolvency law of England and Wales, including the Cape Town Convention as implemented by the United Kingdom on November 1, 2015. The leases in the transaction will be subject to English law and will represent International Interests as defined by the Cape Town Convention and will be subject to a 60-day Cape Town Alternative A waiting period for an insolvency of British Airways.


The ratings of the Certificates reflect the credit quality of British Airways; the credit benefits of the typical features of EETCs, including cross-default and cross-collateralization of the equipment notes, separate 18 month liquidity facilities on each class, and cross-subordination pursuant to the Intercreditor Agreement; attractive aircraft collateral; and a legal jurisdiction that supports timely repossession following a payment default by British Airways on the transaction's equipment notes. National Australia Bank, New York Branch will provide the separate liquidity facilities for each class.

Six Airbus A350-1000 wide-bodies and two A320neo narrow-bodies will secure the transaction. These models will remain important in British Airways' fleet throughout the financing's 13-year term, making it unlikely that British Airways or an insolvency administrator would reject this financing in an insolvency scenario. The A350s will replace a sub-set of British Airways' Boeing B747-400 fleet. The company has 18 A350-1000s on order, one-third of which will represent the majority of the collateral for the 2019-1 EETC transaction. The range of the A350-1000 will allow its use across British Airways existing long-haul network as well as for new routes it might open.

The respective notching for the Class AA and Class A Certificates is seven and three, respectively, above the company's Baa3 long-term issuer rating. Moody's estimates the respective peak loan-to value (LTV) for the Class AA at about 49% and for the Class A at about 73% (before priority claims: repossession and remarketing costs and liquidity facilities). These occur before 2021, early in the transaction's life. The leases are full-payout leases, amortizing the equipment notes, and thus the Certificates, to zero upon the final minimal lease payment. This structure results in a meaningfully larger improvement in the equity cushion over the last five years of the transaction relative to those in most other EETC transactions, which only partially amortize equipment note balances to rather significant balloon payments at the final scheduled repayment dates. The full payout structure de-risks this transaction relative to EETCS issued by other airlines and supports the notching of each tranche.

The terms of the intercreditor agreement restrict the minimum proceeds for which an aircraft or equipment note may be sold during the first nine months following a Certificate default, 75% and 85% of the then appraised current market value for the sale of an aircraft or an equipment note, respectively. This restriction and the cross-subordination provisions of the Intercreditor agreement should support recovery on the Class AA certificates under a certificate default scenario.

Moody's estimates LTVs using its estimates of initial market values, which are informed by estimates made by appraisal firms included in the offering memorandum and other appraisers. Moody's projects declines in the LTVs for the Class AA and Class A to about 50% and 67%, respectively, in June 2024 and to 42% for the Class AA by June 2029. The notching for each class considers the trend and size of the equity cushions, Moody's belief of the importance of the aircraft to the network and the anticipated competitive coupons of Certificates which together will lower the probability of rejection under an insolvency scenario.

Moody's estimates the aggregate market value of the eight aircraft at about $1.104 billion at the issuance date, about $867 million in June 2024, and about $607 million in June 2029. These values compare to about $1.120 billion, $968 million and $800 million on the same dates, respectively, of maintenance-adjusted base values disclosed in the offering memorandum. The gap grows with the passage of time because Moody's reduces values faster than the three percent standard used in EETC offerings; 7.5% in year one and 4% per year on a straight-line basis from year two for the A320neos and 7.5% in year one and 5% per year from year two for the A350s, also on a straight line basis.

Any combination of future changes in the underlying credit quality or ratings of British Airways, unexpected changes in its fleet that de-emphasizes the models in this transaction or unexpected material changes in the market value of the aircraft could cause Moody's to change its ratings of the Certificates. However, if Moody's was to upgrade its ratings of British Airways, it is not likely that the Class AA and possibly the Class A of the company's EETCs would be upgraded. This reflects the declining weight applied to the collateral as a company's corporate rating climbs Moody's rating scale.

Based in Harmondsworth, UK, BA is the UK's largest international scheduled airline and Europe's third-largest airline carrier in terms of revenues. In 2018 the company reported revenues and an operating profit before exceptional items of GBP13 billion and GBP2 billion, respectively.


..Issuer: British Airways Pass Through Trust 2019-1A

....Senior Secured Enhanced Equipment Trust, Assigned A3

..Issuer: British Airways Pass Through Trust 2019-1AA

....Senior Secured Enhanced Equipment Trust, Assigned Aa2

Outlook Actions:

..Issuer: British Airways Pass Through Trust 2019-1A

....Outlook, Assigned Stable

..Issuer: British Airways Pass Through Trust 2019-1AA

....Outlook, Assigned Stable

The methodologies used in these ratings were Enhanced Equipment Trust and Equipment Trust Certificates published in July 2018, and Passenger Airline Industry published in April 2018. Please see the Rating Methodologies page on for a copy of these methodologies.


For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on

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