Moody's lowers UAL, United

Moody's Investors Service said it lowered UAL Corp.'s corporate family and probability-of-default ratings to Caa1 from B2, lowered United Air Lines, Inc.'s senior secured bank credit facility to B3 (LGD3, 36%) from B1 (LGD3, 42%) and affirmed the SGL-3 speculative-grade liquidity rating.

Also, United Air Lines' 2007-1 senior secured pass-through Enhanced Equipment Trust Certificates were downgraded to Ba1 from Baa2 for the class A certificates, to B1 from Ba2 for the class B certificates and to B2 from B1 for the class C certificates.

The outlook is negative.

The agency said the downgrade reflects the prospects of a weakening financial profile for United and the rest of the airline industry in the face of persistently elevated fuel prices, as well as potential revenue pressure as the domestic economy weakens. As non-fuel operating costs for United are somewhat higher than peers, when combined with the unprecedented fuel costs, negative free cash flow at the airline is likely over the near term, Moody's predicted.

The SGL-3 rating reflects an adequate liquidity profile, the agency said. The amount of cash last disclosed by the company of about $2.7 billion to 2.8 billion and comparatively moderate scheduled debt maturities and capital spending commitments provide near-term flexibility.

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