MOODYS.COM 11 DECEMBER 2017 NEWS & ANALYSIS Corporates 2 » Delta Air Lines' joint venture with WestJet is credit positive » TTM Technologies' planned acquisition of Anaren is credit negative » DaVita's planned sale of integrated care unit is credit positive » Novatek's launch of its Yamal LNG facility is credit positive » Polsat's offer for Netia is credit positive Infrastructure 8 » Emera's equity issuance is credit positive, but financial metrics remain weak Banks 9 » Greek banks meet nonperforming exposure targets, a credit positive » Landesbank Baden-Wüerttemberg's sale of legacy structured credit portfolio is credit positive » Basel Committee’s low risk weight for covered bonds is credit positive for issuing banks » China’s regulation on banks’ liquidity will help curtail shadow-banking Insurers 15 » UnitedHealth's Acquisition of DaVita Medical Group Is Credit Positive Sovereigns 16 » Venezuela's attempt to circumvent sanctions by creating a cryptocurrency is unlikely to succeed Securitization 18 » Loan limits in US higher education bill would be credit positive for some student lenders and ABS RECENTLY IN CREDIT OUTLOOK » Articles in Last Thursday’s Credit Outlook 20 » Go to Last Thursday’s Credit Outlook Click here for Weekly Market Outlook, our sister publication containing Moody’s Analytics’ review of market activity, financial predictions, and the dates of upcoming economic releases. NEWS & ANALYSIS Credit implications of current events 2 MOODY’S CREDIT OUTLOOK 11 DECEMBER 2017 Corporates Delta Air Lines’ joint venture with WestJet is credit positive Last Wednesday, Delta Air Lines, Inc. (Baa3 stable) and WestJet Airlines Ltd. (Baa2 negative) announced that they intend to launch an immunized joint venture that will deepen the companies’ existing code-sharing arrangement into a partnership in which the companies will coordinate schedules and pricing. Additionally, the companies expect to enhance frequent flyer benefits and realize cost synergies from co-locating at certain airports and in other areas. The joint venture is credit positive for Delta because we expect it to generate incremental revenue and earnings without affecting Delta’s senior unsecured rating. The parties expect to receive their boards’ and regulatory approvals for the joint venture in the first quarter of 2018. Delta will expand its offering of flights between the US and Canada, which currently includes about 35 Canadian destinations. It expects increased passenger volumes as WestJet customers utilize the broader network that they will be able to access. The companies did not disclose the nature of the arrangement, although we believe that Delta prefers a profit-sharing arrangement rather than a revenue-sharing arrangement. Unlike its other joint ventures (the exception being its joint venture with Virgin Australia Holdings Limited [B2 negative]), Delta will not purchase an ownership stake in WestJet. WestJet currently offers flights to approximately 26 US destinations and contributes 21% of scheduled US/Canadian transborder capacity, while Delta accounts for 7%, making them the second- and fifth-largest market participants, respectively (see Exhibit 1). EXHIBIT 1 Air Canada and United Air Lines’ share is twice that of WestJet and Delta’s Canada-US transborder scheduled capacity market share, 2016 Source: Official Airline Guide Data The Canadian provinces of Ontario, British Columbia, Alberta and Quebec account for about 91% of all US transborder revenue passengers in Canada. WestJet remains more dominant in Western Canada, where there are fewer travelers than in Air Canada’s stronghold in the eastern Canadian provinces (see Exhibit 2). Air Canada45%WestJet21%United Airlines12%American Airlines9%Delta Air Lines7%Other6%Jonathan Root, CFA Vice President - Senior Credit Officer +1.212.553.1672 jonathan.root@moodys.com This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history. NEWS & ANALYSIS Credit implications of current events 3 MOODY’S CREDIT OUTLOOK 11 DECEMBER 2017 EXHIBIT 2 Eastern Canadian provinces fed 55% of Canada-US transborder traffic in 2016, and Air Canada remains the dominant provider Contribution to total number of revenue passengers on Canada-US transborder scheduled flights, 2016 Source: Statistics Canada - Catalogue no. 51-004-X Of 22.2 million Canada-US transborder passengers in 2016, Ontario accounted for 8.7 million, Quebec 3.4 million, British Columbia 4.7 million and Alberta 3.5 million. We believe that the Delta-WestJet combination strengthens the offering, particularly to those traveling to and from Western Canada, more so than in Eastern Canada, where Air Canada has leading share and benefits from code-sharing with its Star Alliance peer, United Contin