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Fitch Affirms Allegheny County Airport Revs at 'BBB+'; Outlook Stable

Dépèche transmise le 6 octobre 2009 par Business Wire

NEW YORK--(BUSINESS WIRE)--Fitch Ratings affirms approximately $510.7 million of outstanding airport revenue bonds issued by the Allegheny County Airport Authority, Pennsylvania (the authority) at 'BBB+'. The Rating Outlook is Stable. The bonds financed terminal and other improvements at the Pittsburgh International Airport (the airport), and are secured by the net revenues generated from the operations of the airport.

The 'BBB+' reflects the additions of service by incumbent and low-cost carriers causing an increasingly diverse mix of airlines following the retrenchment of US Airways; induced origination and destination enplanements as a result of low cost fairs; diverse revenue sources with contributions from state gaming revenues and a portion of passenger facilities charges (PFC) revenues to offset debt service and reduce direct airline costs; and a modern airport facility providing adequate terminal and airfield capacity capable of handling significant growth. The rating also reflects a moderate cost per enplanement; a continued decline in enplaned passengers which has been ongoing annually since 2001; more accelerated declines in passengers resulting from the recent national economic downturn, and management's challenge to reduce operating expenses in the face of declining passengers.

The Stable Outlook is based on the authority's ability to maintain its current financial and ratemaking flexibility in the face of additional declines in enplanements, little or no need for additional debt in the medium-term, a declining debt service profile, and reduced exposure to the operations of any one airline.

The airport is now a largely origination and destination (O&D) airport with over 90% of traffic related to O&D up from 37% in 2001. Enplanements have fallen steadily since 2001 with an average rate of decline of approximately 11% per year. The airport recorded 4.4 million enplanements in fiscal year 2008, an 11.3% decrease. Enplanements through July of fiscal year 2009 are down approximately 10.3% from the prior year. As a result of US Airways' 'dehubbing' from the airport and redefining it as a focus city, there is significant capacity for expansion with only 48 of the 75 jet gates and none of the 25 commuter aircraft parking positions being utilized. US Airways currently occupies 10 of their 12 gates on a signatory basis (down from 50 total gates in 2006) and comprises 27% of total enplanements. Southwest Airlines is the second largest carrier at the airport with a 20% market share in enplanements, while AirTran and Delta comprise about 10% each. As a result, the airport is now more reliant on the underlying market than the operations of any one particular airline for the generation of passenger demand.

Net revenues, including reserves as allowed under the indenture, equaled 1.45 times (x) in 2008, in line with previous years. Operating revenues declined slightly in 2008, but the authority has continued to apply PFC revenues to offset debt service payments, reducing the direct cost passed on to the airlines. Additionally, $107.5 million of the $150 million committed from state gaming revenues established in 2006 will be used to offset debt service after the remaining $10.2 million in loans is repaid to Allegheny County for the Midfield Terminal financing. The provision of these revenues underscores the working support of the county and state in the airports operations. The airport has securitized $20 million in gaming revenues with PNC bank and applied $6.5 million in 2008, $10 million in 2009 and can apply the remaining $3.5 million in 2010 to reduce the costs charged to airlines. The airport's cost per enplaned passenger declined slightly to $12.60 in 2008 from $13.31 in 2007. However, with the recent reduction in operations and incorporating the $10 million in securitized gaming revenues, the airport expects the cost per enplaned passenger in fiscal 2009 to increase to approximately $13.40 or higher depending on enplanement levels. Coverage for the first half of fiscal 2009 was 1.65x, and as of June 30, 2009 the authority had cash reserves of $73.7 million in capital funds and capital reserve accounts and additional $17.4 million in unrestricted cash.

The airport serves six counties of western Pennsylvania as well as portions of West Virginia and Ohio and has a population base of approximately 2.3 million. The airport is located 16 miles west of downtown Pittsburgh on a 9,000 acre site, with the nearest major commercial service airport approximately 140 miles away.

Additional information is available at www.fitchratings.com.

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