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09 May 2001
MOODY'S ASSIGNS Aaa RATING TO AMERICA WEST AIRLINES, INC. CLASS G PASS-THRU CTFS, Ba1 TO THE CLASS C AND Ba3 TO THE CLASS D CERTIFICATES.
Approximately $427 Million of Debt Securities Affected.
New York, May 09, 2001 -- Moody's Investors Service has assigned the following ratings to America
West Airlines, Inc. Pass Through Certificates Series 2001-1:
$325,142,960 Class G Certificates: Aaa
$ 57,021,340 Class C Certificates: Ba1
$ 45,000,000 Class D Certificates: Ba3
The rating on the Class G Certificates is based on the certificate guaranty
insurance policy issued by Ambac Assurance Corporation ('Ambac') to support
the timely payment of interest when due and the ultimate payment of principal
on the Class G Certificates. Moody's rating of the Insurance Financial
Strength of Ambac is Aaa. The rating on the Class C and Class D
Certificates is based on the ability of the issuer to make timely payments
of interest and ultimate payment of principal at a date no later than
the legal final maturity date of the Certificates. The ratings
are based on the credit quality of America West Airlines, Inc.
("America West") as obligor under the leases, the value of the aircraft
pledged as security for the equipment notes, and the credit support
provided by the liquidity facilities for the Class C Certificates.
The rating on the Class D Certificates reflects the lack of a liquidity
facility available to support interest payments in the event of a shortfall
in payments received from America West.
The long term senior unsecured rating of America West, B1 with a
negative rating outlook, reflects America West's recent weak financial
performance and the potential for continued earnings and cash flow pressures
during the remainder of 2001. Impacting the company's performance
are the potential for continued high fuel costs, soft yields,
increased maintenance and other costs. The negative outlook anticipates
the potential for further downward movement of the rating if any or all
of these factors cause cash flow to fall below expected levels.
America West built a strong positioned primarily in the Phoenix and Las
Vegas markets. The company's financial performance has suffered
in the past two quarters due to higher operating costs and poor customer
service that developed in mid-2000. Operating performance
has recovered but has resulted in increased maintenance costs and lower
aircraft utilization. The company experienced a fourth quarter
2000 net loss of $78.8 million (compared to a profit of
$46.1 million a year earlier) and in the first quarter of
2001, a $12.8 million net loss compared to a $14.6
million profit a year earlier. The fourth quarter loss primarily
reflects operational difficulties as the company struggled with aircraft
maintenance issues while the first quarter loss reflects the continued
impact of high fuel prices and a decline in yields related to the general
slowdown in business travel. Historically, the second and
third quarter are periods of stronger earnings for America West and are
important periods of cash flow generation to cover cash needs in the fourth
and first quarters of the year.
Several factors could negatively affect the company's cash flow sufficiently
to generate a reassessment of the existing ratings. The softening
economy may drive yields and/or load factors to unanticipated levels,
adversely affecting revenues. The company's negotiations with its
pilots (a request for mediation has been filed) could, in the long
term, result in a substantial increase in labor costs. And,
other costs, fuel for example, could increase unexpectedly.
The company has initiated programs to reduce costs, including a
$75 million reduction in the company's annualized expense budget
over the next year and the deferral of approximately $25 million
in capital projects in 2001. These programs should help America
West in its efforts to improve cash flow over the longer term.
Nonetheless, Moody's believes that in a weaker economic environment,
it will be difficult for America West to return to historical levels of
profitability. Should a weaker economic environment persist,
cash flow generation will likely be impaired, and with large aircraft
lease payments anticipated in the third quarter, the company's cash
balance is likely to weaken. The company 's cash position is considered
sufficient for current circumstances and is anticipated to be adequate
to meet its needs in the immediate future. The company does have
a line of credit in place, but because its aircraft fleet and substantially
all of its other assets are pledged to support existing debt, the
company has limited financial flexibility beyond that. Moody's
will continue to monitor current and future operations of the company
as well as its ability to meet terms and conditions of its financial arrangements
to ensure that debt protection measures are still supportive of the current
The proceeds from the offering will be placed in an escrow account and
used to purchase equipment notes issued in connection with separate financing
transactions for nine Airbus A319-132 aircraft, which are
expected to be delivered new to America West Airlines, Inc.
("America West") between May and December of 2001 and five Airbus A320-232
aircraft which are expected to be delivered new to America West between
November 2001 and May 2002.
As additional security for the notes, irrevocable revolving credit
agreements will be entered into providing for drawings to pay interest
on the Class G and Class C Certificates on any three successive semi-annual
payment dates in the event of a shortfall or default in payments from
America West. Interest on the Class D Certificates is not covered
by a liquidity facility. Westdeutsche Landesbank Girozentrale,
acting through its New York Branch is the initial provider of liquidity
facilities. The liquidity facilities do not provide for drawings
to pay for principal or premium on the Certificates. The obligations
of Westdeutsche Landesbank Girozentrale have a Moody's short-term
rating of Prime-1 and a senior unsecured long term debt rating
of Aaa. Moody's notes that outstandings under the liquidity facility
have a lien prior to that of the Certificates on the proceeds of the liquidation
The Certificates are not obligations of, nor are they guaranteed
by, America West. However, the lease rentals payable
by the airline, together with payments under any owned aircraft
note payments, will be sufficient to pay in full all principal and
interest on the secured promissory notes when due. The secured
promissory notes are secured by a security interest in the aircraft and,
for leased aircraft, by an assignment of the relevant leases.
It is the opinion of counsel to America West that the Loan Trustee will
be entitled to the benefits under section 1110 of the U.S.
Any future changes in the underlying credit quality of Ambac and its ratings
could cause a change in the rating of the Class G Certificates.
Any change in the credit quality of America West and its ratings,
and/or material changes in the value of aircraft pledged as collateral,
and/or changes in the status of the liquidity facility or the credit quality
of the liquidity provider could cause a change in the rating of the Class
C and/or Class D Certificates.
America West Airlines, Inc. is headquartered in Tempe,
Michael J. Mulvaney
Moody's Investors Service
JOURNALISTS: (212) 553-0376
SUBSCRIBERS: (212) 553-1653
VP - Senior Credit Officer
Moody's Investors Service
JOURNALISTS: (212) 553-0376
SUBSCRIBERS: (212) 553-1653
No Related Data.
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