TEXT-Fitch puts US Airways on rating watch positive

Thu Feb 14, 2013 5:32pm EST

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
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