WestJet Airlines Ltd. , Canada’s second-largest air carrier , saw its bonds fall to their lowest level since they were issued in June, as spikes in the cost of fuel and trade tensions are dimming its earnings outlook.
WestJet’s eight per cent bond with a 2031 maturity was trading around 85 cents on the dollar Tuesday morning, down around three per cent from Monday’s close, paring an earlier decline. The bond has been sliding steadily since early October, when it was trading around 95 cents.
S&P cut its rating on WestJet deeper into junk to B- from B in September, following downgrades from Moody’s Ratings and Fitch earlier in the year.
WestJet has been hammered by global and domestic turmoil. The Calgary-based airline reported weaker-than-expected second-quarter results, S&P said. A strike by the airline’s flight attendants in August caused “meaningful disruptions” that the ratings agency expected to affect third quarter results.
Jet fuel price increases and volatile trade negotiations between Canada and the United States also pose risks for the company, S&P said. This year, WestJet cut 10 U.S.-bound flight routes from Canada, Simple Flying first reported.