Fitch Affirms Ratings on EENs Issued by AIR 2 US

CHICAGO--()--Fitch Ratings has affirmed the ratings for Series A and Series B enhanced equipment notes (EENs) issued by AIR 2 US at 'BB' and 'B-' respectively. The rating Outlook for both series is Stable.

AIR 2 US is a special purpose Cayman Islands company created to issue EENs; utilize the proceeds to purchase Permitted Investments; and enter into a risk transfer agreement. AIR 2 US entered into the risk transfer agreement (the Payment Recovery Agreement), with a subsidiary of Airbus. The primary provision of the Payment Recovery Agreement states that if United Airlines, Inc. (United) fails to pay scheduled rentals under existing subleases of aircraft with subsidiaries of Airbus, AIR 2 US will pay these rental deficiencies to a subsidiary of Airbus. These deficiency payments will come from the cash flows created by the Permitted Investments. As such, the greatest risk of the transaction is the bankruptcy risk of the lessee airline.

AIR 2 US is not covered effectively by Fitch's EETC ratings criteria as a result of the fact that aircraft cannot be sold and liquidated in the event of lease rejection of Airbus A320 aircraft sub-leased by United. Applying a framework similar to that employed in analysis of corporate obligations, Fitch expects recoveries for Series A note holders to be very strong in a lease rejection scenario. Discounted lease cash flows, applying heavy stresses to current A320 lease rates, cover Series A principal and a full liquidity facility draw. The 'BB' rating, three notches above United's 'B' IDR, reflects the high level of projected recovery.

Expected recoveries for Series B note holders would be weak, reflecting a high probability of lease payment shortfalls in a post-rejection scenario. The one notch differential between the Series B note rating and United's 'B' corporate IDR captures this weak recovery potential.

Fitch has affirmed the ratings as follows:

AIR 2 US

--Series A Enhanced Equipment Notes at 'BB'; Outlook Stable;

--Series B Enhanced Equipment Notes at 'B-'; Outlook Stable;

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 5, 2013);

--'Recovery Ratings and Notching Criteria for Non-Financial Corporate Issuers' (Nov. 13, 2012).

Applicable Criteria and Related Research:

Corporate Rating Methodology - Effective from 8 August 2012 - 5 August 2013

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460

Recovery Ratings and Notching Criteria for Non-Financial Corporate Issuers

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=693773

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=801558

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Primary Analyst
Joe Rohlena, CFA, +1 312-368-3112
Associate Director
70 W. Madison
Chicago, IL 60602
or
Secondary Analyst
Craig Fraser, +1 212-908-0310
Managing Director
or
Committee Chairperson
Stephen Brown, +1 312-368-3139
Senior Director
or
Media Relations:
Brian Bertsch, +1 212-908-0549
brian.bertsch@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst
Joe Rohlena, CFA, +1 312-368-3112
Associate Director
70 W. Madison
Chicago, IL 60602
or
Secondary Analyst
Craig Fraser, +1 212-908-0310
Managing Director
or
Committee Chairperson
Stephen Brown, +1 312-368-3139
Senior Director
or
Media Relations:
Brian Bertsch, +1 212-908-0549
brian.bertsch@fitchratings.com