NYTimes.com Article: US Airways Debt Downgraded, Stirring Doubt on Jet Financing

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US Airways Debt Downgraded, Stirring Doubt on Jet Financing

May 6, 2004
 By BLOOMBERG NEWS





By Bloomberg News

The credit rating of the US Airways Group was downgraded
one level by Standard & Poor's yesterday, casting doubt on
the airline's financing from the General Electric Company
for new smaller jets that would reduce costs.

The downgrading came on the day that Edward G. Rendell, the
governor of Pennsylvania, said that US Airways told him it
might stop using Pittsburgh as a base.

The lowering to a rating of CCC+ from B-, reflects a need
for US Airways to "dramatically lower" expenses amid
low-fare competition and rising fuel prices, an S.& P.
analyst, Philip Baggaley, said.

The company needed to maintain a B- rating from Standard &
Poor's or a B3 rating from Moody's Investors Service under
terms of the agreement with General Electric. The airline's
rating by Moody's is already below that level, at C.

General Electric, the airline and the makers of the jets
are in talks on changing the terms regarding the credit
ratings, according to a US Airways spokesman, David
Castelveter.

Bombardier of Canada and Empresa Brasileira de Aeronáutica
of Brazil won orders in May 2003 from US Airways for 170
regional jets valued at $4.8 billion. Delivery of some jets
has started.

US Airways is seeking to cut costs in preparation for
competition in Philadelphia from the low-fare carrier
Southwest Airlines, which starts service from there on
Sunday. Philadelphia is US Airways' largest market.

US Airways is "under fire and trying to pull off a rapid
restructuring," Mr. Baggaley said.

Mr. Rendell said officials of the airline told him
yesterday that the carrier was going to have to scale back
flights and cut employees in Pittsburgh and ask remaining
workers for concessions.

"It's possible the whole airline goes under, but it's also
possible they just pull out of Pittsburgh," he said in an
interview.

The carrier has posted losses in three quarters since
emerging from bankruptcy proceedings in April 2003. Last
month, Bruce Lakefield succeeded David N. Siegel as the
chief executive. Dave Davis succeeded Neal Cohen as chief
financial officer this week.

http://www.nytimes.com/2004/05/06/business/06air.html?ex=1084874056&ei=1&en=19bda40fd0531a1e


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