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Fitch Affirms Lee County, Florida's Airport Revenue Bonds at 'A'; Outlook Stable

Dépèche transmise le 19 mai 2009 par Business Wire

NEW YORK--(BUSINESS WIRE)--Fitch Ratings affirms the outstanding 'A' rating on Lee County, Florida's $348 million airport revenue bonds. The Rating Outlook on all bonds is Stable. The bonds are payable from the net revenues generated by the operations of Southwest Florida International Airport (the airport). Lee County also has $34 million of separately secured Passenger Facility Charge (PFC) revenue bonds outstanding; these bonds are not rated by Fitch.

The 'A' rating reflects the airport's history of strong passenger demand for air service; the airport's new terminal and existing runway facilities, which provide adequate terminal and airfield capacity; the diverse group of carriers serving a 100% origination and destination (O&D) market; the airport's adequate cash balance; manageable near-term capital requirement with no bonding needs; and the lack of material airport competition in the region. Credit concerns center on the potential impact on traffic activity due to the relatively severe economic downturn in the Fort Myers area; the airport's relatively high dependence on seasonal and discretionary/leisure passengers (tourism-based travel); and the airport's ability to contain its costs through a period of traffic stagnation. The airport is moderately leveraged when compared to its peers.

The Stable Outlook reflects the airport's relatively resilient traffic profile in light of the economic downturn. An adequate balance sheet helps to mitigated some declines in traffic and provide a degree of financial flexibility appropriate for the rating category. Fitch also expects that the recently renewed airline use agreement, which will utilize both residual and compensatory rate settings, will provide solid coverage levels.

The county owns the airport, which is operated by the Lee County Port Authority (Port Authority). The airport's location, 15 miles southeast of Fort Myers, provides credit strength as the closest competitors (Tampa and Miami International Airports) are more than a two-hour drive from the airport. Nearby airports in Naples, FL and Sarasota, FL offer less expansive service. Historical passenger demand at Fort Myers has been strong, with five years of consecutive enplanement growth from 2003 to 2007, and 3.9 million passengers enplaned in fiscal 2008 (Sept. 30 year end). While 2008's enplanements mark a 4.8% decline versus 2007, this is a modest decrease compared to several peer airports. Year to date for fiscal 2009, the airport has seen a 4% decline in enplanements year on year, while April showed a 2% increase over the previous year.

The airport has a healthy mix of carriers, with the top five carriers (Airtran, Delta, JetBlue, Southwest, and USAir) sharing equally in 56% of 2008 total enplanements. The airport's steady shift towards low cost carriers since 2000 has been positive for enplanements.

The Port Authority also has a strong balance sheet position, providing a partial mitigant to recent traffic declines and thinning coverage. Cash and equivalents were $82 million as of Sept. 30, 2008, representing 22% cash to total debt, or 3.2 times (x) annual debt service requirements. These levels compare favorably to peer airports.

The Port Authority recently negotiated a new airline use and lease agreement, commencing on Oct. 1, 2008; the agreement has a five-year term, and maintains 10 signatory carriers. The new agreement is a hybrid compensatory agreement with a revenue sharing component (airport retains 60% of excess revenues, signatory carriers retain 40%). Landing fees are calculated using a residual airfield cost center approach, while terminal rents are calculated using a commercial compensatory method. The agreement provides increased flexibility to the airport, as there is no majority-in-interest (MII) approval required for capital projects.

Despite resilient traffic figures for the airport, the decline in the economy of its service area may lead to declining or stagnant enplanement levels in the near term, putting pressure on airport revenues. Since 2006 the airport has also faced a higher annual debt service requirement. Net revenues generated during fiscal 2008 provided 1.16x coverage of annual debt service; following transfer of surplus PFC revenues, coverage was 1.30x. This is modestly down from 1.24x coverage in 2007, or 1.35x after PFC transfer. In light of thinning coverage levels and downward pressure on enplanements, it will be important for airport management to contain costs in order to maintain coverage levels that are consistent with an 'A' category rating while working within the new use and lease agreement. Furthermore, Fitch will look for maintenance of healthy financial performance without significant impact on airport rates and charges. Cost per enplaned passenger (CPE) was $7.49 in fiscal 2008, and has been in the $7 range since the opening of the new Midfield terminal. CPE is expected to further increase in 2009 and 2010 to the $8 to $9 range, putting the airport's costs at the high end of the scale for Florida leisure airports.

Airport facilities include a large 12,000-foot runway capable of handling all aircraft currently in service, and a 798,000 square foot mid-field terminal, which has been in operation since fiscal 2006 and doubled the space of the prior facility. The airfield is currently at 62% capacity, and preliminary work on construction of a parallel 9,100-foot long runway is under way; total project costs are estimated at $500 million, largely to be funded with state and federal grants. Modern terminal facilities, large existing runway, and a planned runway expansion position the airport well for future passenger demand.

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.