Credit rating agency Standard & Poor's cut the corporate credit rating of British Airways to a "junk" grade BB+ from BBB- today.
The downgrade concludes a review of the impact on BA's creditworthiness of the war in Iraq and a slump in Asia ticket sales due to the Severe Acute Respiratory Syndrome virus.
BA shares sagged 5.3 per cent to 143-1/2 pence, while BA's sterling bonds were bid around a point lower, traders said. They quoted its 8.75 per cent bond due August 2016 at 95 per cent of face value bid this afternoon.
"As a result of the more challenging industry environment, S&P believes that British Airways' financial profile and credit measures are no longer, nor are likely to be, over the next several years, appropriate for an investment-grade rating," said S&P analyst Bob Ukiah in the statement.
British Airways criticised the move. "I am astonished that Standard & Poor's has chosen to downgrade us at this time," British Airways' chief financial officer Mr John Rishton said in a statement.
He said that since the last S&P review British Airways had achieved all of the financial and restructuring targets aimed at making the airline leaner and more efficient. Only last week credit agency Moody's confirmed its rating for BA, he said.
"The war is over, SARS is fading, the US economy is showing signs of recovery and traffic volumes are improving from the worst levels," Mr Rishton said.