How long have you had the card (including the US Airways card it was converted from)? If less than a year, that could be the problem. There's a "consumer protection" law passed a few years ago that banks are interpreting as not allowing for upgrades or downgrades until you've had the card for at least a year.

Have you tried instead of a retention offer? See this thread in the Credit Cards forum (where, btw, your thread belongs):
If you look at recent posts there, people are getting their annual fee waived on their Red cards often. Why not try for that, and put off downgrading for a year?

Btw, the no-fee version earns only 1 mile for every $2 spent and has a typical forex fee. Why not consider instead downgrading to the Blue (if you can't get the annual fee waived), which has half the annual fee ($50) and still earns 1 mile for every $1 spent, and still has 0$ forex.