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Fitch Affirms Charlotte North Carolina Airport Revs 'A+'; Outlook Stable

Dépèche transmise le 29 avril 2011 par Business Wire

NEW YORK--(BUSINESS WIRE)--Fitch Ratings affirms the underlying 'A+' rating to Charlotte, North Carolina's (the airport) $586 million airport revenue bonds outstanding.

The Rating Outlook is Stable.

RATING RATIONALE:
--The airport's outstanding financial performance as evidenced by continued high levels of historical and projected debt service coverage ratios (DSCRs) in excess of 3.0 times (x) and exceptionally strong liquidity translating to over 2000 days cash on hand;
--Very low leverage resulting in debt per enplaned passenger of $37.00 allowing Charlotte to maintain the lowest cost per enplaned passenger (CPE) levels in the U.S. airport industry at less than $1.00;
--The airport's affordable and prudently managed capital program which calls for approximately $215 million in near-term debt financing needs.
--Significant single-carrier concentration, with US Airways (IDR 'CCC' by Fitch) comprising approximately 89% of total enplanements, exposing the airport to the carrier's scheduling decisions as well as the overall aviation environment;
--A weak 30% ratio of origination and destination (O&D) traffic base, which leaves the airport exposed to significant downside risk to a partial or full de-hubbing;

KEY RATINGS DRIVERS:
--Maintenance of the current traffic base and commitment from the airport's dominant carrier, US Airways, despite the recovery uncertainties in the economy and air travel industry;
--Continued ability to manage the airport's overall airport cost profile and generation of strong debt service coverage at or near historical levels.

SECURITY:
The bonds are secured by a net revenue pledge from operations of the airport, along with additional accounts held under the resolution.

CREDIT SUMMARY:
Passenger traffic growth at the airport has been strong in recent years and continues to outperform prior traffic forecasts. Charlotte's traffic base achieved a record of more than 19 million enplaned passengers in fiscal 2010 benefiting on both the O&D and connecting traffic components. Total enplanements from 2006 through 2010 grew by 7.7% average annually while total seating capacity offered grew 2.1% on an average annual basis during this period, indicating healthy load factors on flights served at the airport. Connecting passengers, which make up the largest component of the airport's volume, increased by 17% during the first six months of fiscal 2011 as US Airways continues to focus commercial hubbing through the airport.

With the benefit of strong business performance, debt service coverage continues to remain very comfortable at or above the 3.0x (times) range. In fiscal 2010, net operating revenues of approximately $70 million generated 3.3x debt service coverage ratio (DSCR). Adjusted debt service coverage, reflecting the addition of PFCs to net operating revenues instead of a direct debt service offset, generated a DSCR of 2.30x, slightly down from 2.41x in fiscal 2009. Cost per enplanement levels have been consistently under $1.00, ranging from $0.76 to $0.94 during three most recent fiscal year period through 2010. In fiscal 2011, the airport is estimating coverage will similarly remain at or above the 3.0x range and CPE will remain under the $1.00 range.

The combination of the airport's strong balance sheet, low leverage, and healthy coverage ratios, offset the significant risks associated with a low O&D base and significant carrier concentration and have allowed the airport to achieve and maintain its current rating of 'A+', and may be positioned to see credit stability even under adverse conditions with regards to carrier service or connecting traffic. Specifically, if US Airways were to measurably restructure its route network and de-emphasize Charlotte airport as a primary connecting hub, Fitch believes this event would have an immediate effect on the airport's operations, and probability of backfill service may be limited. However, the airport's strong internal liquidity, modest capital demands, flexibility to increase PFC charges, and low cost structure place the airport well to deal with such a challenge.

Despite the airport's extremely healthy cash balances and tremendous financial flexibility, upward rating movement is unlikely unless there is significant change with respect to carrier concentration and dependence upon connecting traffic.

Under a stress case scenario reviewed by Fitch that assumes a 100% reduction in US Airways' connecting activity, airline costs would be significantly higher, near the $4.00 to $5.00 per passenger range when PFCs are used to reduce debt service. The stress scenario also indicates that coverage would fall to near the low 2.0x range, as management would increase its PFC collection to $4.50 and apply unspent PFC balances to reduce debt service to continue to maintain a low airline cost base. In this scenario, the airport would rely heavily on PFC collections to maintain a low cost structure, and long-term traffic depressions could substantially affect the airport's ability to continue offsetting debt service as well as negatively affect revenue sharing agreements with the signatory airlines. Despite the increase in CPE, drop in coverage and heavier reliance on PFC revenue, the resulting financial metrics would still be consistent with an 'A' category rating.

The airport is owned by the city and operated as a self-supporting enterprise fund. The airfield and terminal occupy 6,000 acres located seven miles west of the central business district. An appointed aviation director manages airport operations and capital improvements.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:
--'Rating Criteria for Infrastructure and Project Finance,' (Aug. 16, 2010);
--'Rating Criteria for Airports' (Nov. 29, 2010).

Applicable Criteria and Related Research:
Rating Criteria for Airports
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=578745
Rating Criteria for Infrastructure and Project Finance
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=548345

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