S&P cuts US Airways

Standard & Poor's said it lowered its ratings on US Airways Group Inc. and its US Airways Inc. subsidiary because of a lack of progress in crucial labor negotiations and rapidly dwindling time to avert a second bankruptcy filing. The outlook is negative.

S&P lowered US Airways Group's corporate credit rating to CCC- from CCC and US Airways' corporate credit rating to CCC- from CCC, equipment trust certificates to CCC from CCC+ and pass-through certificates series 1998-1B to B- from B, 1C to CCC- from CCC, series 1999-1B to B- from B, 1C to CCC- from CCC, series 2000-3C to CCC from CCC+ and series 2001-1C to CCC from CCC+.

On Sept. 6 US Airways Inc.'s pilots' union reported that it would not submit management's contract proposal to membership for a vote, as the company had requested. S&P said achievement of a cost-saving agreement with the pilots is considered a necessary first step toward securing contract revisions with other labor groups. Time to negotiate such agreements is now very limited, as the company faces a large pension payment on Sept. 15.

Ratings on US Airways reflect a high near-term risk of bankruptcy, a weak financial profile, mounting pressure from low-cost competitors and the challenge of rapidly lowering the airline's operating costs in response to these threats, according to S&P.

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