S&P affirms Atlantic Coast

Standard & Poor's said it affirmed its corporate credit and other ratings on Atlantic Coast Airlines Holdings Inc. (B-/negative/--) after United Air Lines Inc.'s decision to reject the airlines' fee-per-departure agreement.

Both airlines have reached an agreement that provides for an orderly transition and exit plan for Atlantic Coast's United Express operation. The transition, subject to bankruptcy court approval, is scheduled to begin June 4, 2004, and continue through Aug. 5, 2004.

Termination of the agreement will allow Atlantic Express's new low-fare airline, named Independence Air, to commence operations this summer. However, Atlantic Coast's planned transition to an independent low-fare airline entails significant risks, the agency said.

S&P said the ratings on Atlantic Coast reflect its relatively small size within the high-risk U.S. airline industry and substantial operating lease burden, mitigated to some extent by revenue stability that has been provided by fee-per-departure contracts with major airline partners. Atlantic Coast currently operates two regional airlines that offer feeder service for both United Air Lines Inc. and Delta Air Lines Inc., primarily along the East Coast and in the Midwest and Canada, under fee-per-departure agreements.

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