Moody's upgrades American Airlines certificates

Moody's Investors Service said it changed its outlook on American Airlines Group, Inc. to positive from stable, upgraded four of the company's enhanced equipment trust certificates and affirmed all other ratings, including the B1 corporate family rating.

The agency upgraded the company’s series 2011-1B tranche enhanced equipment trust certificates to Ba1 from Ba2, America West Airlines, Inc.’s series 1998-1A tranche enhanced equipment trust certificates to Baa1 from Baa2 and US Airways, Inc.’s series 2000-2G and series 2000-3G tranche enhanced equipment trust certificates to Baa1 from Baa3.

The positive outlook reflects Moody's expectation of improving operating profit and free cash flow in 2015 because of the sharp drop in the cost of jet fuel, leading to significantly stronger credit metrics.

The upgrades of the three A-tranche trust certificates reflect the growing equity cushions of these transactions in the next 15 months to above 60% based on Moody's estimates of loan-to-values and continuing relevance of the respective aircraft collateral to the combined operation. The agency said American Airlines will retrofit the cabins of each of the A319s in each of these transactions as part of a $2 billion customer improvements program.

The fourth trust certificate upgraded, American Airlines’ series 2011-1 B-tranche, levels the rating of this tranche with the ratings of other of the company's B-tranches with similar loan-to-value ratios, Moody’s said.

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