From the FT;
'British Airways received a welcome lift on Tuesday when Standard & Poor's stopped short of cutting the struggling carrier's corporate credit rating to junk status.
The US credit rating agency said it would keep the rating at BBB-, just one notch above the top speculative grade and remove the company from its watch list, although it said the outlook remained negative.
The decision followed an in-depth review of BA's Future Size and Shape strategy announced in early February. It contrasts sharply with S&P's warning immediately after the strategic plan was unveiled that it was preparing to relegate the rating to junk.
S&P expressed strong misgivings at the time, describing the plan as "highly challenging". Bob Ukiah, an analyst at S&P, said on Tuesday his concerns had diminished after spending several weeks going over the details with the company.
"Having really thought it through and got close to the plan, we think it is achieveable."
BA, which is heading for its biggest loss since privatisation 15 years ago, is planning to cut a further 5,800 jobs and is seeking to cut costs by £650m within two years.
S&P's decision to leave the corporate rating unchanged will give a timely lift to management, after the City's initial lukewarm reception to the strategy.
Andrew Light, at Schroder Salomon Smith Barney, said his one remaining concern was the reaction of unions to the job losses, amid signs that traffic was now recovering.
"On paper I agree with everything BA is doing. It looks good," he said. He calculated that BA, which is sharply reducing its capital expenditure, can cut net debt from £6.5bn to £4.5bn by March 2005.
Mr Ukiah said the combination of the cost-cutting and the recovery in traffic and fares would help the company move "towards" its operating margin target of 10 per cent.
S&P placed BA on its watch list at the end of November, when it downgraded the senior unsecured debt to junk status.
The City will be watching closely what Moody's does next, after it downgraded BA's unsecured debt to junk status in December.'