Moody's upgrades American Airlines

Moody's Investors Service said it upgraded American Airlines Group, Inc.’s corporate family rating to Ba3 from B1, probability of default rating to Ba3-PD from B1-PD and senior bonds to B1 (LGD5) from B3 (LGD5).

The agency upgraded American Airlines, Inc.’s senior secured credit facility to Ba1 (LGD2) from Ba2 (LGD2), series 2001-1A1 senior secured enhanced equipment trust certificates to B1 from B2, series 2011-1A senior secured enhanced equipment trust certificates to A3 from Baa1, series 2001-1B senior secured enhanced equipment trust certificates to Caa2 from Caa3 and series 2001-1C senior secured enhanced equipment trust certificates to Caa2 from Caa3.

America West Airlines, Inc.’s series 2000-1G1 senior secured enhanced equipment trust certificates were upgraded to Baa2 from Baa3.

US Airways Group, Inc.’s senior bonds were upgraded to B1 (LGD5) from B3 (LGD5).

The agency upgraded US Airways, Inc.’s senior secured credit facility to Ba1 (LGD2) from Ba2 (LGD2); series 2000-3C, series 2012-1C and series 2012-2C senior secured enhanced equipment trust certificates to Ba3 from B1; series 2013-1A, series 2012-2A, series 2011-A, series 2010-1A and series 2012-1A senior secured enhanced equipment trust certificates to A3 from Baa1; and series 2001-1G senior secured enhanced equipment trust certificates to Baa1 from Baa2.

The remaining ratings were confirmed. The outlook was changed to stable. This concludes the review for upgrade that began on June 16 following the implementation of Moody's change to its approach for standard adjustments for operating leases.

The agency said the upgrade considers the benefits to American of key industry drivers including the expected sharply lower cost for jet fuel, a supportive outlook for passenger demand and ongoing capacity discipline in the pursuit of earning targeted returns on invested capital. Moody's expects these factors to contribute to strengthening of credit metrics through 2016 to levels reflective of the Ba-rating category.

The upgrade also reflects the reduction in adjusted debt due to changes in Moody's approach for capitalizing operating leases. Moody's reduced its debt adjustment to $14 billion from about $22.4 billion for American Airlines Group, providing a one-turn decrease in debt to EBITDA to 4.2 times at the end of 2014.

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