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Fitch: Stormy Forecast for Some Airports in 2012

Dépèche transmise le 14 décembre 2011 par Business Wire

NEW YORK--(BUSINESS WIRE)--Fitch predicts flat or nominal traffic growth for most airports in 2012. The sector faces headwinds in the form of carriers restraining capacity and macroeconomic pressures. Some are dealing with the last operational changes attributable to the mergers between United and Continental and Southwest and Airtran. Still others may feel the brunt of AMR's restructuring and route changes.

Overall, we expect revenue growth for U.S. airports in 2012 to be between negative 0.8% and 3%. Fitch's growth projection is based on the relationship between enplanements at U.S. airports and several macroeconomic indicators and was first detailed in a Fitch special report titled "Riding the Business Cycle," published on Oct. 20, 2011.

U.S. airlines have signaled that 2012 scheduled capacity growth will remain constrained or even reduced in the face of high jet fuel costs and the potential for sluggish air travel demand growth in an uncertain macroenvironment. The AMR bankruptcy is likely to drive additional capacity discipline, as underperforming routes are cut and the carrier's fleet is rationalized in Chapter 11.

The operational changes brought on by recent merger participants will also present some challenges. Secondary hubs such as Memphis or Cleveland's Hopkins International could suffer if their respective anchor carriers reduce or reallocate direct service to other primary hubs such as Atlanta or Chicago. Fitch has set Memphis airport revenue bond rating at 'A+' with a Negative Rating Outlook, while Cleveland airport's revenue bonds hold an 'A-' rating, with a Stable Rating Outlook. There are also a number of upcoming slot revisions in the Washington and New York markets caused by mergers. However, their impact remains to be seen.

The bankruptcy of AMR could be even more challenging for some airports. The impact on American's hubs is still unfolding, and Fitch will continue to assess it. However, American has a dominant market share position in a notable handful of regional airports. One is Northwest Arkansas Regional Airport, whose revenue bonds Fitch rates 'BBB', where American represents 40% of enplanements. Most of the other O&D airports rated by Fitch have exposures to American of less than 30%. No detail on the significance of this can be gleaned until American's route changes become clear in the bankruptcy proceeding.

Additional information is available on www.fitchratings.com

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

Applicable Criteria and Related Research:

Riding the Business Cycle: A Descriptive Overview of U.S. Airport Traffic and Analytical Implications

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=652191

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