TEXT-Fitch puts US Airways on rating watch positive
Feb 14 - Fitch Ratings has placed the ratings for US Airways Group, Inc. (LCC) and US Airways Inc. on Rating Watch Positive following the announcement of the merger agreement with AMR Corporation (AMR). Fitch will complete a full review of the ratings following the completion of the merger. The rating for AMR ('D') will be unaffected while the company remains under the protection of the bankruptcy court. A full rating list is shown at the end of this release. The Rating Watch Positive reflects the potential benefits from the combined airline's route structure, leading positions in key U.S. markets, and potential cost and revenue synergies. The merger will expand the reach of both airlines' individual networks, as the two currently have relatively little overlap in their route structures. Importantly, the expanded network will bolster the ability to feed passengers into the combined airline's international network. The merger will also create the U.S.'s largest airline, completing the cycle of consolidation that has occurred in the industry over the past decade. Industry consolidation could support future pricing actions as well as the ability to rationalize capacity, promoting continued improvement in profitability. Merger concerns include integration challenges, including those related to IT functions, the size of one-time merger costs, and the timing of the realization of potential cost and revenue synergies. In Fitch's view the merger also does little to address the relative weakness of the combined airline in Asia, currently the aviation sector's fastest-growing market. Integration risks are partially mitigated by the fact that both airlines have managed through mergers in the past, and Fitch estimates that the airlines could face lesser labor integration issues than some previous airline combinations. The merger requires approval of the bankruptcy court and the Department of Justice, but Fitch does not anticipate anti-trust issues will be a significant obstacle at this time due to the small amount of route overlap between LCC and AMR. Fitch's full rating review following the completion of the merger will focus on the combined capital structure, a more detailed analysis of proposed cost and revenue synergies, and the strategic position of the new airline. Rating Sensitivities: The Positive Watch for US Airways indicates that a near-term positive rating action is possible following a successful completion of the US Airways/AMR merger after further analysis of the merger's potential benefits. Fitch expects the possible upgrade would most likely be one to two notches, depending on the credit profile of the combined airline. The ratings could be affirmed at the current levels if the merger is not completed, or if Fitch considers the merger's potential benefits and risks to be insufficient to raise the credit profile. A negative rating action is not anticipated at this time absent a drastic and sustained fuel shock or other unexpected severe drop in demand for air travel. Fitch has placed the following ratings on Rating Watch Positive: US Airways Group, Inc. --IDR 'B-'; --Senior Secured Term Loan Due 2014 'BB-/RR1'; --Senior Unsecured Convertible Notes due 2014 and 2020 'CCC/RR6'. US Airways Inc. --IDR 'B-' Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. Applicable Criteria and Related Research: --- Corporate Rating Methodology (Aug. 8, 2012); --- Recovery Ratings and Notching Criteria for Nonfinancial Corporate Issuers (Nov. 13, 2012). Applicable Criteria and Related Research: Corporate Rating Methodology Recovery Ratings and Notching Criteria for Non-Financial Corporate Issuers
DAVOS, Switzerland - Central banks have done their best to rescue the world economy by printing money and politicians must now act fast to enact structural reforms and pro-investment policies to boost growth, central bankers said on Saturday.