Fitch Ratings-Chicago-04 January 2017: Fitch rates the following American Airlines, Inc.‘s (American; rated ’BB-’/Outlook Stable) proposed Pass-Through Trusts Series 2017-1:

-$536,811,000 class AA certificates due in February 2029 ‘AA’;
-$248,627,000 class A certificates due in February 2029 ‘A’.

KEY RATING DRIVERS

Fitch issued a press release earlier today assigning ratings of ‘AA’ and ‘A’ to the American Airlines 2017-1 Pass Through Trust Certificates. The previous release stated that the ‘AA’ tranche would be sized at $404.9 million and the ‘A’ tranche at $187.6 million, respectively. American has since upsized the transaction as referenced above, and has added six aircraft to the collateral pool consisting of three A321-200s, one 787-8, and 2 ERJ-175s. The decision to upsize the transaction does not impact Fitch’s ratings.

Base case loan-to-value (LTV) ratios in the upsized transaction are identical to those referenced in Fitch’s initial press release. The initial base LTV for the ‘AA’ tranche is 39.5% as calculated by Fitch, and the initial ‘A’ tranche LTV is 57.8%.

The maximum stress case LTV’s for both the ‘AA’ and ‘A’ tranche are roughly 0.5% points higher than the figures cited in Fitch’s initial release due to a slightly higher concentration of 787-8s and ERJ-175s in the collateral pool. The 787-8 and ERJ-175 receive greater asset value haircuts in Fitch’s stress scenarios compared to the 787-9 and A321-200. Fitch now calculates the maximum stress case LTV for the ‘AA’ certificates at 83% and for the ‘A’ certificates at 86.6%.

Fitch considers the increased size of the collateral pool to be a minor positive in terms of the affirmation factor (likelihood that American would choose to affirm the collateral pool in a bankruptcy scenario).

For more information please see the initial press release at www.fitchratings.com

RATING SENSITIVITIES
Both the AA and A tranche ratings are primarily based on a top-down analysis based on the value of the collateral. Therefore, a negative rating action could be driven by an unexpected decline in collateral values. A321, 737, and ERJ values could be negatively impacted by the rising prevalence of the re-engined versions of those aircraft. ERJ values could be affected by the concentration of ERJs operated by a limited number of users. Senior tranche ratings could also be affected by a perceived change in the affirmation factor or deterioration in the underlying airline credit. The ‘AA’ tranche may also be downgraded to below the ‘AA’ category if American’s IDR were downgraded to ‘B-’ or below as stipulated in Fitch’s EETC criteria.

Fitch does not anticipate taking positive rating actions on either tranche of debt over the intermediate term.

FULL LIST OF RATING ACTIONS

Fitch currently rates American as follows:

American Airlines 2017-1 pass-through trust:
—Series 2017-1 class AA certificates ‘AA’;
—Series 2017-1 class A certificates ‘A’.

American Airlines Group Inc.
-Long-Term IDR ’BB‘;
-Senior unsecured notes ’BB/RR4’.

American Airlines, Inc.
-Long-Term IDR ’BB‘;
—Senior secured credit facilities ’BB+/RR1’.