Moody's ups UAL

Moody's Investors Service said it raised UAL Corp.'s corporate family and probability of default ratings to B3 from Caa1, along with the first-lien senior secured ratings on the $1.225 billion term loan due 2014, the $255 million revolving credit due 2012 and the $500 million notes due 2013 secured by the company's Japan routes each to B1 from B3, the rating on the second-lien senior secured notes due 2013, also secured by the Japan routes, to Caa1 from Caa2, and the rating on the $175 million senior notes due 2012 secured by the company's spare parts to Ba3 from B2. Moody's also said it affirmed the speculative grade liquidity rating of SGL-2 and each of its ratings on the enhanced equipment trust certificates issued by United Airlines, Inc.

The ratings remain under review for possible upgrade because of UAL's intention to merge with Continental Airlines, Inc., previously announced in May.

The upgrade recognizes the strengthening of liquidity and credit metrics that has occurred since the beginning of 2010, Moody's said.

UAL's capacity discipline, well-established position in the trans-Pacific and geographically advantaged U.S. West Coast hubs have helped it achieve significant improvements in operating metrics in the first half of 2010, which has led to strong growth of earnings and of free cash flow, the agency said.

The upgrades also reflect an anticipation of a supportive demand environment and measured capacity growth by most of U.S. carriers in upcoming quarters, Moody's added.

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