OREANDA-NEWS. Fitch Ratings has affirmed Aviation Capital Group Trusts as follows:

Aviation Capital Group Trust (ACG)
--Class A-1 at 'Csf'; RE 35%;
--Classes B-1, C-1, and D-1 at 'Csf'; RE 0%.

Aviation Capital Group Trust III (ACG III)
--Class G-1 at 'Asf'; Outlook Stable;
--Class B-1 at 'A-sf'; Outlook Stable;
--Class C-1 at 'BBBsf'; Outlook Stable.

KEY RATING DRIVERS

The affirmation of the notes in ACG reflects Fitch's view that default is inevitable. Trust leverage has continued to increase as all classes have loan to value (LTV) ratios in excess of 100% and lease cash flow has continued to decrease. Fitch expects these trends to continue, as the trust continues selling aircraft and those remaining in the portfolio are comprised of less in-demand aircraft types. Under Fitch's base case scenario, the class A-1 notes are not expected to pay in full. Fitch estimates principal recoveries to be 35% of the current A-1 balance. Classes B-1, C-1, and D-1 were affirmed at 'Csf/RE0%' reflecting the expectation they will receive no further payments.

The affirmations of the class G-1, B-1, and C-1 notes in ACG III reflect the credit risk of each class which is consistent with their current ratings. The collateral pool has generated collections within Fitch's initial expectations to date. Meanwhile, leverage levels for all classes have decreased since close. The results of Fitch's cash flow modeling analysis, as well as strong collateral characteristics and decreasing leverage for all classes, has resulted in the affirmations and maintenance of Stable Rating Outlooks.

RATING SENSITIVITIES

Fitch expects the LTV of ACG III to continue decreasing as the collateral provides stable cash flow to the transaction. If performance continues as expected, a Positive Rating Actions or Outlook may be warranted for the outstanding notes.

Due to the correlation between the global economic conditions and the airline industry, the ratings may be impacted by the strength of the macro-environment over the remaining term of these transactions. Global economic scenarios that are inconsistent with Fitch's expectations could lead to negative rating actions. For example, the occurrence of an extended global recession of significantly greater severity than the last two experienced, and the resulting strain on aircraft lease cash flow, could lead to a downgrade of the notes. Additionally, changes in the airline industry can have significant impact on the ratings of these transactions. If the timing of or degree of technological advancement in the commercial aviation space differed materially from Fitch's expectations, a rating movement may occur.