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Fitch Affirms Columbus Regional Airport Auth, OH's $90MM Revs at 'A'; Revises Outlook to Positive

Dépèche transmise le 24 mai 2011 par Business Wire

NEW YORK--(BUSINESS WIRE)--Fitch Ratings affirms its 'A' rating on the Columbus Regional Airport Authority (CRAA or the authority), Ohio's approximately $90 million of outstanding airport revenue bonds. The rating outlook is revised to Positive from Stable.

RATING RATIONALE:

--The Positive Outlook reflects the authority's demonstrated ability to maintain a very strong financial profile through economic cycles evidenced by a low debt burden, strong cash reserves and stable airline costs;

--A medium size air trade service area that is predominantly origin and destination (O&D) oriented (99% of airport's 3.2 million total enplanements in 2010) as well as the fairly constant demand for air service in the greater Columbus area. While the enplanement base has been stable over a longer period, the authority experienced some volatility in traffic in the recent years, largely due to the entry and exit of Skybus and JetBlue airlines coupled with the economic downturn, with enplanements down an aggregate 17.6% between peak in 2007 and 2010. Fitch notes that while other airports in Ohio could pose some measure of competitive risk to the traffic utilization over time, this risk has not been a material issue to CRAA;

--A well diversified mix of low cost and legacy carriers, led by Southwest/AirTran (Southwest Airlines rated 'BBB', with a Stable Outlook by Fitch) that comprises a combined 36% of total enplanements;

--Consistently sound financial operations and a competitive cost structure with cost per enplaned passenger (CPE) at $7.72 in 2010. Under the current airline use agreements, the authority has not only strong cost recovery provisions but also prudent carrier revenue sharing arrangements. Given the proximity of several airports, Fitch recognizes that there may be some competitive pressure on the CPE;

--Strong debt service coverage levels (2.78 times (x) in 2010 with a policy to maintain an at least 2.00x coverage) in conjunction with robust liquidity (646 days cash on hand) and comparatively low levels of financial leverage (debt burden of $29 per enplaned passenger and a -0.4x net debt/cash flows available for debt service);

--Modest Capital Improvement Program (CIP), with no planned additional long-term borrowing in the next five years.

WHAT COULD TRIGGER A RATING UPGRADE:

--Sustainable favorable trends in traffic and revenue performance at CRAA coupled with continued maintenance of strong financial ratios over the next one to two years would strengthen the authority's credit quality;

--Continuation of the current capital plan which does not include any sizable borrowing plans.

SECURITY:

The bonds are secured by the net revenues generated by the operations of Port Columbus International Airport (the airport) and Bolton Field.

CREDIT SUMMARY:

The airport's primary service market, which includes the eight-county Columbus Metropolitan Statistical Area (MSA), has remained relatively resilient over time, although some uneven performance was experienced through the economic downturn. Reflecting the exit of Skybus and JetBlue airlines in 2008 as well as the national recession, enplanements declined 10.5% and 9.7% in 2008 and 2009, respectively. However, enplanements were up 1.9% to 3.2 million in 2010 and grew on average by 1.6% in the first three months of 2011 (through March), reflecting signs of recovery. Management anticipates these traffic patterns to continue through the end of the fiscal year (ending Dec. 31), with more flights, seat capacity and routes added by the airlines. A demonstration of continued positive service levels and traffic levels will be a key consideration for rating improvement. Fitch notes the airport benefits from a diverse carrier mix, with Southwest, the airport's leading carrier, accounting for just 27% of the airport's enplaned passengers in 2010.

The authority's use and lease agreement, establishes a hybrid structure of rate setting, with a compensatory methodology used for terminal charges and a residual methodology used for the airfield. The agreement has provided for consistently strong financial and operating results, with net revenues as defined by the indenture providing 2.78x coverage of annual debt service in 2010. When including a portion of the airport's passenger facility charges (PFC) available to support eligible debt service in the coverage calculation (about $2.7 million annually), coverage goes up to 3.13x in 2010. Going forward, the authority is projecting coverage levels to remain healthy but decrease to a minimum of 2.12x in 2012 due to additional airline credits for the inline baggage system. Management anticipates maintaining an indenture based coverage of at least 2.00x by managing revenue sharing with the airlines, as per the requirements outlined in the use and lease agreement.

The authority's operating revenues increased at a compound annual growth rate (CAGR) of 3.8% from 2005 - 2010 (to $74.2 million in 2010), with greater increases in airline revenues. Expenses increased at a 5% CAGR over the same time frame (to $53.7 million in 2010), reflecting the addition of Rickenbacker in the authority's financial statements and higher salaries and benefits. The airport's cost per enplaned passenger (CPE) increased from $5.62 in 2006 to $7.72 in 2010, but remains competitive with comparable size airports. The CPE is expected to stay within the $7 - $8 range, driven by terminal rental rate increases associated with the airport's new inline baggage screening system and larger airline credits to offset landing fees.

The authority's debt structure is conservative and includes approximately $90 million in outstanding fixed rate airport revenue bonds and $5 million in outstanding subordinate commercial paper notes with interest rate of 0.30% (down from $21 million last year). The authority has voiced its intention to utilize its commercial program to fund a portion of its CIP over the next three years.

The airport's 2011 - 2013 CIP totals $227 million (versus $398 million at last review for the 2009 - 2017 period); projects at Bolton and Rickenbacker increase the overall program to $295 million. The largest projects at the airport include a new inline baggage facility for the terminal and a relocation of a runway. The construction of a consolidated rental car facility has been postponed until after 2018. The authority plans to finance these projects through a variety of revenue sources, including grant funding (31% from airport improvement program (AIP) and other federal and state grants), PFC receipts (18% on a pay-as-you-go basis), internal sources (22%), and 30% funded through the airport's CP program to be repaid with a combination of letter of intent (LOI) and PFC moneys. The authority has a low debt burden of $29 per enplanement and does not anticipate any long-term debt financing within the next five years.

The authority operates Port Columbus International Airport, which serves as the primary commercial airport for central Ohio; Bolton Field, a general aviation facility; and Rickenbacker International Airport, which the authority absorbed through a 2003 merger with the Rickenbacker Port Authority and operates primarily as an all-cargo airport. Presently the operations of Rickenbacker are not included in the definition of revenues for the indenture that governs the authority's outstanding bonds.

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 Infrastructure and Project Finance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=548345

Rating Criteria for Airports

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=578745

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