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Rating Action:

Moody's rates US Airways' 2011-1 EETC

21 Jun 2011

$388.2 million of pass-through certificates rated

New York, June 21, 2011 -- Moody's Investors Service assigned Ba2 and B2 ratings to the Class A and Class B Pass Through Certificates, Series 2011-1, respectively, of the 2011-1 Pass Through Trusts (the "Class A Certificates" and "Class B Certificates" or collectively, the "Certificates") to be issued by US Airways, Inc. ("US Airways"). The transaction documentation provides for the possible issuance of one additional subordinated tranche of certificates at a future date. The subordination provisions of the inter-creditor agreement provide for the payment of interest on the Preferred Pool Balance of the Class B Certificates before payments of principal on the Class A Certificates. Amounts due under the Certificates will, in any event, be subordinated to any amounts due on either of the Class A or Class B Liquidity facilities, each of which provides for three consecutive semi-annual interest payments due the respective Certificate holders.

Assignments:

..Issuer: US Airways, Inc.

....Senior Secured Enhanced Equipment Trust, Assigned Ba2

....Senior Secured Enhanced Equipment Trust, Assigned B2

The Class A and Class B Equipment Notes ("Notes") issued by US Airways and acquired with the proceeds of the Certificates will be the primary assets of the Pass Through Trusts. The Certificates' proceeds will refinance five currently owned Airbus aircraft; each delivered new in 2009 or 2010 and four newly-manufactured Airbus A321-200 aircraft to be delivered prior to December 15, 2011. The payment obligations of US Airways under the Notes will be fully and unconditionally guaranteed by US Airways Group, Inc.

RATINGS RATIONALE

The ratings of the Certificates consider the credit quality of US Airways and US Airways Group (Corporate Family Rating of Caa1, stable outlook) as obligor or guarantor under the Notes, Moody's opinion of the collateral protection of the Notes, the credit support provided by the liquidity facilities, the cross-subordination provisions of the inter-creditor agreement and certain structural characteristics of the Notes such as the cross-collateralization and cross-default provisions and the protections of Section 1110 of Title 11 of the United States Code (the "Code"). The assigned ratings of Ba2 and B2 on the Class A and Class B Certificates, respectively, reflect Moody's opinion of the ability of the Pass-Through Trustees to make timely payment of interest and the ultimate payment of principal at a date no later than April 22, 2025 for the Class A Certificates and April 22, 2020 for the Class B Certificates, each the final maturity dates.

The aircraft collateral of this financing will be among the youngest vintages in any of US Airways' (including those of the former America West Airlines) other Enhanced Equipment Trust Certificate ("EETC") financings. Additionally, the underlying obligations of a majority of the aircraft in the other EETCs of US Airways are operating leases, whereby an unrelated third-party holds the equity and ultimate potential loss position in the event of a restructuring by US Airways. The ratings assigned to each of the tranches of the Series 2011-1 certificates reflects Moody's belief of a high probability of affirmation by US Airways of the underlying equipment notes in the event of a reorganization by it under a default scenario because of the young age of the aircraft and the cross-default and cross-collateralization feature. The ratings also consider the more modest over-collateralization that this financing contemplates relative to those of other recent EETCs issued by other U.S. carriers.

At Ba2, the rating on the A-tranche of 2011-1 is one notch above the current Ba3 ratings on the G-tranches of US Airways' 2000-2, 2000-3 and 2001-1 EETCs, financings with higher loans-to-value based on Moody's estimates of current market values of aircraft. Moody's believes that the probability of affirmation of US Airways' obligations under the underlying financing agreements is greater for the 2011-1 Series because of the operating benefits of nearly new aircraft versus those of 10 or 11-year old Airbus aircraft in its other EETCs. The inclusion of two A330-200s in the 2011-1 EETC also makes the collateral of 2011-1 more attractive relative to the company's more seasoned EETC issues, but equally attractive to the 2010-1 Series under a reorganization scenario, as there are relatively few wide-bodies in this carrier's fleet and the lift provided by these aircraft would be needed to support its long-haul network. The over-collateralization that this financing contemplates (loan-to-value of about 60% on the A-tranche and above 75% on the B-tranche) based on Moody's estimates of current market value provides a smaller equity cushion relative to those of the A and B tranches of other EETCs recently issued by other U.S. carriers. Nevertheless, the cross-collateralization of the equipment notes should enhance the recovery for investors in the unlikely event of the rejection of the aircraft by US Airways under a bankruptcy scenario and pursuant to the provisions of the Code or in the event of a default on the Certificates.

Any combination of future changes in the underlying credit quality or ratings of US Airways or U.S. Airways Group, unexpected material changes in the value of the aircraft pledged as collateral, and/or changes in the status or terms of the liquidity facilities or the credit quality of the liquidity provider could cause Moody's' to change its ratings of the Certificates.

General Structure of the Series 2011-1 EETC

The portion of the proceeds of the Certificates earmarked for the future deliveries of the A321-200 aircraft will initially be held in escrow and deposited with the Depositary, The Bank of New York Mellon (short-term rating of P-1), until the issuance of each of the nine Notes.

The collateral pool consists of the following nine aircraft:

(i) one 2009 vintage CFM56-5B4 powered Airbus A320-200

(ii) four 2011 vintage and two 2009 vintage IAE V2533 Select One powered Airbus A321-200s (Heavy Gross Weight of 205,000 MTOW)

(iii) two 2010 vintage Trent 772B powered Airbus A330-200s

The Certificates issued to finance the aircraft are not obligations of, nor are they guaranteed by US Airways. However, the amounts payable by US Airways under the Notes will be sufficient to pay in full all interest and principal on the Certificates when due. The Notes will be secured by a perfected security interest in the aircraft. It is the opinion of counsel to US Airways that the Notes will be entitled to the benefits of Section 1110 of the U.S. Bankruptcy Code. Scheduled interest payments on the Certificates will be supported by the separate liquidity facilities sized to pay up to three respective consecutive semi-annual interest payments in the event US Airways defaults on its obligations under the Notes. The liquidity facilities do not provide for payments of principal due, nor on interest on the Certificate proceeds held in escrow during the Delivery Period. Natixis S.A. acting through its New York Branch (Moody's short-term rating of P-1) will provide the liquidity facilities. The liquidity provider has a priority claim on proceeds from liquidation of any of the aircraft or of the Notes and other Trust collateral ahead of any of the holders of the Certificates and is also the controlling party following a default under the Notes indentures.

Cross-Collateralization

The ratings of the 2011-1 Certificates benefit from the cross-collateralization of the Notes, a feature which Moody's believes can enhance recovery in the event of a default. The structure provides that for each aircraft sold following a default, the excess of sale proceeds above the payoff of the related equipment notes is made available to cover potential shortfalls that might arise under any other equipment note upon the sale of the aircraft pledged to any such note. Importantly, following a default, all excess proceeds are retained until the settlement at maturity of the last of the equipment notes or the indentures are cancelled.

Moody's considers the number of aircraft and the number of different aircraft models that comprise the collateral pool when assessing the benefit of a cross-collateralized EETC. At nine aircraft covering three different types, the collateral pool is modest in size, providing only limited benefit for this feature. The included aircraft types do not constitute a significant concentration in any particular aircraft type within its combined mainline fleet. Being the youngest vintages in the company's fleet and that each of the models would be integral to the company's network support the likelihood of affirmation by US Airways of its obligations under the Notes under a reorganization scenario, thus minimizing the probability of the cross-collateralization benefit being called upon by creditors over the life of the transaction.

The principal methodology used in rating U.S. Airways Group, Inc. was the Global Passenger Airlines Industry Methodology, published March 2009 and Enhanced Equipment Trust And Equipment Trust Certificates Methodology, published December 2010.

US Airways Group, Inc. ("US Airways), based in Tempe, Arizona, through its subsidiaries operates one of the largest airlines in the U.S. with service throughout the U.S. as well as Canada, Mexico, Europe, the Middle East, the Caribbean, Central and South America.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service information, and confidential and proprietary Moody's Analytics information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of assigning a credit rating.

Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

New York
Jonathan Root
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Michael J. Mulvaney
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service, Inc.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's rates US Airways' 2011-1 EETC
No Related Data.
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