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S&P: US Airways on negative watch
Standard & Poor's said its ratings on US Airways Group Inc. and its US Airways Inc. subsidiary (both B-/Watch negative/--), which were lowered to current levels Jan. 9, remain on CreditWatch with negative implications, where they were placed on Dec. 10, 2003.
US Airways Group Inc. announced an agreement with the Air Transportation Stabilization Board under which subsidiary US Airways Inc. prepaid $250 million of its original $1 billion loan (the balance is now $726 million) in return for relief on covenants.
At the same time, the company disclosed that its 2003 10-K report would contain a going concern qualification in the auditor's letter, which cites uncertainty regarding covenant compliance, and its ability to finance upcoming regional jet deliveries and to lower operating costs to compete with low-cost airlines.
S&P said the loan restructuring averts a potential near-term covenant default and buys time for the airline to pursue urgently needed cost reductions. US Airways emerged from bankruptcy March 31, 2003 with an improved operating cost structure and reduced debt burden but has been unprofitable (excluding special items) since then and needs to further lower costs in the face of a still-weak airline industry environment and rapidly rising competition from low-cost airlines.
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