Fitch Ratings Dwngrs Aircraft Indebtedness Repackaging Trust, 1997-1.

Business Editors

NEW YORK--(BUSINESS WIRE)--Aug. 16, 2002

Fitch Ratings (Fitch) has taken the following rating actions for Aircraft Indebtedness Repackaging Trust, 1997-1:

--Class A certificates are downgraded to 'B' from 'BBB-'; --Class B certificates are downgraded to 'CCC' from 'B+'; --Class C certificates are downgraded to 'CC' from 'B-'.

The above rating actions reflect the bankruptcy filing of US Airways Group, Inc. (US Air) as well as the outlook for the aircraft that support the Aircraft Indebtedness Repackaging Trust (AIRT) transaction. The ratings on the certificates address the timely payment of interest and the ultimate payment of principal by the final legal distribution dates which are December 1, 2014; June 1, 2013; and June 1, 2012, respectively, for the class A, B, and C certificates.

During the first 60 days of its bankruptcy, US Air is not required to make payments to support AIRT and many other aircraft financings. According to United States Bankruptcy Law, US Air must determine whether it will resume payments or permanently stop payments during the 60 day period. Renegotiations of payments could also occur. Permanent stoppage of AIRT payments would trigger a return of the aircraft collateral. Interest and principal on AIRT are paid every 6 months with the next payments due December 1, 2002. AIRT has liquidity facilities sufficient to pay interest on the rated classes for 3 payment periods.

While it is difficult to determine which payments US Air will continue, renegotiate or stop permanently, Fitch expects that US Air will not resume payments to support AIRT. As part of its bankruptcy, US Air is expected to downsize its fleet and eliminate non-core aircraft. The 757-200 aircraft backing the AIRT transaction appear to be non-core given US Air's preference for an all Airbus and regional jet aircraft fleet. If the 757-200 aircraft are returned, the certificateholders will look to sell the aircraft. During the sale period, principal will not be paid, but liquidity facilities will be used to provide timely interest for 3 interest payments on all three rated classes.

Although the short term prospects for the 757-200 aircraft are poor, Fitch expects that a sale of the aircraft before liquidity runs out is possible, but at a considerable discount of its current base value. Values for the 757-200 will be under considerable short term pressure due to expectations that other North American users of the aircraft could be downsizing their fleets in the next six months due to the deteriorating travel markets. Long term, prospects are also weak given the unprecedented imbalance of supply/demand that is effecting many aircraft types, including the 757-200, and is likely to continue for the next few years.

AIRT was established under the laws of the state of Delaware and was formed primarily to issue the above referenced certificates and to purchase and own fixed rate notes. The fixed rate notes are supported by payments from US Air and the value of two Boeing 757-200 aircraft. The fixed rate note payments match those required by the certificates and are passed through to the certificateholders.

AIRT has been structured as an enhanced equipment trust certificate (EETC) transaction. EETCs function as hybrid corporate bonds, and Fitch's EETC ratings are linked to the unsecured corporate rating of the underlying airline. The ratings on EETCs can be significantly higher than those of the airline's unsecured corporate obligations due to the structural features of the transaction.