Fitch Affirms Alcoa's Ratings; Outlook Stable.

NEW YORK -- Fitch Ratings has affirmed the following Alcoa Inc. ratings:

--Issuer Default Rating (IDR) at 'A';

--Senior unsecured debt at 'A';

--$3 billion Revolving Credit Facilities at 'A';

--Commercial Paper at 'F1';

--Preferred stock at 'A-'.

The Rating Outlook is Stable. About $5.2 billion in public notes and $2.2 billion in commercial paper are affected.

Alcoa Inc.'s (Alcoa) ratings reflect the company's leading position in the aluminum industry, its strength in low-cost alumina production, and the operating flexibility afforded by the scope of its operations. Aluminum and alumina account for about three-quarters of revenues. Aluminum prices began showing strength in earnest in the second half of 2003 and are expected to remain at historically high levels, albeit volatile, over the next 12 to 18 months. At the same time, power costs, which account for roughly 30% of the total costs of aluminum, had been on the rise as have most raw materials and consumables. Alcoa works to cut costs through process improvement and consolidation. More recently, Alcoa has been investing in added or new lower cost smelting and refining capacity to replace older plants with unfavorable power arrangements. The company has a strong track record of taking capacity off-stream and otherwise managing its asset base during times of oversupply. Alcoa has approximately 621,000 metric tons per year (mtpy) of idle capacity on a base capacity of 4,251,000 mtpy. In the first half of 2006, 122,000 mtpy of capacity was idled while the Alumar expansion brought 62,000 of additional capacity and the acquisition of the minority interests in Intalco, Wash., and Eastalco, Md., smelters increased capacity by 185,000 mtpy.

Power costs will continue to constrain earnings and cash flow growth during this up-cycle. It is unlikely that there will be debt reduction given some $2.5 billion-$3 billion in capital spending for the year.

Fitch expects Alcoa to continue to balance its capital requirements with its cash flow and keep total debt to EBITDA in the 1.7 times (x) range over the next 12 months. Beyond that period, we expect leverage to come down with increased cash flows and debt repayments.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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. The issuer did not participate in the rating process other than through the medium of its public disclosure.