British Airways boosted on Moody's upgrade

The owner of British Airways saw shares climb after Moody’s upgraded the carrier’s rating because of improved earnings.

British Airways had its Moody’s rating upgraded by one level from B1 to Ba3, marking the company as less of a credit risk, after posting strong first quarter profits on Friday.

Shares for the International Airlines Group (IAG), the owner of British Airways, were up 1.84pc to £3.92 in afternoon trading on Monday.

Moody’s said the rating reflected British Airway’s strong performance in 2013, when the carrier’s revenue rose 5.5pc to £11.4bn.

"We are upgrading BA's ratings mainly because of materially improved earnings in 2013 as well as our expectation of further improvements over the next two years”, said Sven Reinke, a Moody's vice president senior analyst.

Moody’s said the weak performance of IAG’s Spanish airline, Iberia, affected the rating.

"While we continue to assess BA on a standalone basis, we nevertheless take into consideration the weaker operating performance at Iberia compared with BA's performance.

“While we recognize the legal separation of the two entities, we will continue to assess the ongoing restructuring initiatives at Iberia and the extent to which these could, over time, impact BA's own financial profile, if at all”, said Mr Reinke.

On Friday, IAG said Iberia had almost halved its operating losses in the first three months of the year to 111m euros (£90.4m), down from 202m euros (£165m) during the same period in 2013.

IAG reported a near 70pc improvement in first-quarter losses after a major restructuring at Iberia, which had been losing 1.7m euros (£1.4m) a day in 2012.