Fitch Upgrades Various American Airlines EETCs; Affirms US Airways' EETCs

CHICAGO—(BUSINESS WIRE)—Following the completion of the merger between American Airlines and US Airways, Fitch Ratings has taken the following actions on rated enhanced equipment trust certificates (EETCs) issued by American Airlines:

American Airlines Pass Through Trust Series 2013-1:

-$506.7 million class A certificates upgraded to ’A’ from ‘BBB+’;

—$156.6 million class B certificates upgraded to ‘BB+’ from ‘B’;

—$119.8 million class C certificates upgraded to ‘B+’ from ‘CCC’.

All three classes of certificates were previously on Rating Watch Positive.

American Airlines Pass Through Trust Series 2013-2:

—$1,408 million class A certificates affirmed at ‘BBB+’;

—$512 million class B certificates upgraded to ‘BB+’ from ‘B’.

The class B certificates were previously on Rating Watch Positive.

Rationale: Fitch initially rated the AA 2013-1 class A certificates ‘BBB+’ despite the structure’s ability to pass Fitch’s ‘A’ level stress test. The ‘BBB+’ rating reflected the inherent uncertainties involved with the bankruptcy process. The one notch upgrade follows the company’s emergence from bankruptcy.

The B and C tranche ratings are notched from the ‘B+’ IDR of the underlying airline. The ‘BB+’ rating for the B tranche reflects a high affirmation factor (2 notches) and the presence of an 18 month liquidity facility (1 notch). The ‘B+’ rating for the C tranche reflects a high affirmation factor (+2 notches) and low recovery expectations (-2 notches). Fitch previously rated the B and C tranches ‘B’ and ‘CCC’, respectively, per Fitch’s criteria for rating subordinated EETC tranches while the issuer is in bankruptcy.

The affirmation of the AA 2013-2 A tranche reflects Fitch’s top down analysis in which loan-to-value (LTV) ratios remain below 100% in our ‘BBB’ level stress test. The AA 2013-2 A tranche does not pass Fitch’s ‘A’ level stress test due to the inclusion of tier 2 and tier 3 aircraft in the collateral pool.

The class B certificate ratings are based on a high affirmation factor (2 notches) and the presence of an 18 month liquidity facility (1 notch). Fitch previously rated the B tranche ‘B’ as per Fitch’s criteria for rating subordinated EETC tranches while the issuer is in bankruptcy.

Fitch has also affirmed the following ratings for EETCs issued by US Airways:

US Airways Pass Through Trust Series 2012-1:

-$378.8 million class A certificates at ’A’;

—$125 million class B certificates at ‘BB+’;

—$118.6 million class C certificates at ‘B+’.

US Airways Pass Through Trust Series 2012-2:

-$418.1 million class A certificates at ’A’;

—$127.1 million class B certificates at ‘BB+’;

—$100 million class C certificates at ‘B+’.

US Airways Pass Through Trust Series 2013-1:

-$620.1 million class A certificates at ’A’;

—$199.5 million class B certificates at ‘BB+’.

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research:

—‘Rating Aircraft Enhanced Equipment Trust Certificates’ (Sept. 12, 2013);

—‘Recovery Ratings and Notching Criteria for Nonfinancial Corporate Issuers’ (Nov. 19, 2013).

Applicable Criteria and Related Research:

Rating Aircraft Enhanced Equipment Trust Certificates

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=717763

Treatment and Notching of Hybrids in Nonfinancial Corporate and REIT Credit Analysis

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696670