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Fitch: Increased Credit Risks for Brazilian Airlines as Demand Softens

Dépèche transmise le 5 mai 2009 par Business Wire

NEW YORK--(BUSINESS WIRE)--Fitch Ratings expects that the Brazilian airlines, dominated by TAM and GOL, will experience continued financial pressure through 2009. Uncertainty in the global airline industry and restricted access to credit has slowed margin recovery for the sector.

'The airlines will continue to face a more challenging operating environment for the remainder of the year,' said Debora Jalles, Associate Director at Fitch Ratings. 'Leverage had substantially increased and the projected slowdown in air traffic in the face of increasing capacity will continue to pressure cash flow.'

'The demand for air transportation in Brazil has slowed significantly, which is resulting in lower yields and load factors,' said Jose Vertiz, Director at Fitch Ratings. 'While the length and severity of the downturn are uncertain, the effects so far are quite certain, and have resulted in higher credit risk.'

TAM and GOL are the dominant players in the Brazilian aviation market, representing an approximate 93% market share. Fitch downgraded the Issuer Default Ratings (IDRs) of both airlines on May 4, 2009. The Negative Rating Outlook on TAM was maintained while GOL was placed on Rating Watch Negative. In addition to the above stated factors, the carriers' cost structure has also been negatively impacted by the strong foreign exchange devaluation; approximately 50% of the cost structure is based on the U.S. dollar.

The full report titled 'Brazilian Airlines: Risks Increase As Demand Softens' is available on the Fitch Ratings web site at www.fitchratings.com.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.