The transaction called Bealine PLC securitizing airport slots at Heathrow airport operated by British Airways (BA) relies heavily on BA's credit worthiness, Moody’s Investors Service analysts said in a conference call held yesterday.

Under the transaction, 31 take offs and landing slots at London Heathrow will be transferred from BA to British Airways Limited, which was set up just for this purpose. The analysts referred to the new BA unit as Air Carrier in the call.

Ning Loh, vice president and senior credit officer in Moody’s structured finance group, said this deal relies “financially and operationally” on BA, assuming the airline still exists. The transaction ultimately depends on the ability of creditors to realize the value of slots if BA has defaulted.

If BA defaults, Air Carrier would need to hold onto the slots. The problem is that the BA unit would not be able to operate the slots in compliance with the minimum slot usage rule under such a financially stressed scenario.

The only way to keep the BA slots and not have to comply with the minimum usage rule is to successfully attain a temporary operating license (TOL). “The key rating issue is if Air Carrier can successfully obtain a temporary operating license if British Airways and Air Carrier are in financial difficulty,” Loh said.

Moody’s believes that the most likely scenario is that Air Carrier would be able to obtain the TOL. 

However, if British Airways does not default, the deal can take advantage of the fact that BA and Air Carrier are participating in a joint operation. This is because regulations allow for slots that belong to one airline to be used by another if both are participating in a joint operation, Moody's said.

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