Citing weak financial performance, Moody's Investors Service downgraded or withdrew about $3.2 billion in US Airways aircraft-backed debt on Friday in another sign that as far as markets are concerned the jury is still out on the airline's restructuring effort.
The action by Moody's reflects ongoing concern about cash-flow at the carrier, which lost $98 million in the fourth quarter and is retooling its business plan a year after exiting bankruptcy to meet stiffer competition from low-cost carriers.
Moody's said in a statement that the downgrades highlighted a combination of continued weak financial performance, the need to further cut costs and low aircraft values industrywide, which potentially heighten risk for US Airways' debt holders.
A US Airways spokesman, however, said the lowered ratings will have no impact on the No. 7 US airline's ability to meet covenants of its post-bankruptcy financing, which are crucial for its survival and have already been restructured. But debt downgrades can affect a company's ability to attract capital and future financing.
In a filing on Friday with the Securities and Exchange Commission, US Airways said chief executive David Siegel made $600,000 in salary and took no bonus in 2003.
He also has a restricted stock plan currently worth less than $5 million, but he cannot sell or transfer any shares until 2005 at the earliest.
Siegel is renegotiating his contract and says he is willing to accept a deal similar to those offered to his counterparts at low-cost competitors.