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Fitch Rates Allegheny County (PA) Airport Auth Ser 2012 Airport Revs 'BBB+'; Outlook Remains Stable

Dépèche transmise le 12 avril 2012 par Business Wire

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned a 'BBB+' rating to Allegheny County (PA) Airport Authority's (ACAA or the authority) $50.8 million of series 2012 bonds. At this time, Fitch also affirms the 'BBB+' rating on $360.9 million of outstanding airport revenue bonds. Pittsburgh International Airport (the airport) also has $8.4 million of subordinate bonds that are not rated by Fitch. The Rating Outlook remains Stable.

The series 2012 bonds will be used to fund 2012 capital projects consisting of parking garage rehabilitation, terminal improvements, rehabilitation and replacement of people-mover cars for the airport internal transit system, and energy saving projects. Bonds are expected to be priced the week of April 23, 2012.

KEY RATING DRIVERS:

Stabilized O&D Traffic Base: Traffic levels have stabilized with an enplanement base of 4.1 million in 2011 after a period of traffic declines driven largely by the de-hubbing operations of US Airways. Traffic increased by 1.5% and 2.0% in 2011 and 2010, respectively. The airport currently services an origination and destination (O&D) passenger base which represents 96% of enplanements.

Diversified Mix of Air Carriers: The airport is currently served by a diverse mix of air carriers compared to 2002 when US Airways represented 87% of enplanements. Southwest/AirTrans is the largest carrier representing 29% of enplanements while US Airways continues to be a major carrier representing 25%. The increased presence of low-cost carriers has also lowered average air fares, resulting in a stronger competitive profile.

Residual Use and Lease Agreement: The airport operates under a cost center residual use and lease agreement, set to expire in 2018. The residual agreement has provided adequate financial flexibility with debt service coverage per indenture stable at 1.4 times (x). Fitch's calculation, which does not include the rolling coverage account, shows adequate financial flexibility at 1.2x.

Fast Debt Amortization but Limited Liquidity: The authority has a front-loaded debt service schedule and amortizes the majority of debt outstanding by 2018. Debt service decreases to $15 million in 2019 from $56 million in 2018. Debt burden is moderate, debt per enplanement in 2011 is $101 and net debt to CFADS is 4.8x. The airport has approximately $17.1 million of unrestricted cash in 2011 equivalent to 72 days cash on hand. The airport also has additional liquidity from Operation and Maintenance (O&M) reserves, renewal and replacement reserves, and rolling coverage reserves totaling $32.9 million.

Diverse Revenue Source: Revenues are derived from diverse sources including contribution from state gaming revenues, customer facility charges (CFC) and a portion of passenger facilities charge (PFC) revenues which go toward reducing direct airline costs. Applications of such revenues have helped the authority maintain a stable cost per enplanement (CPE) at around $14.

Modest Capital Program: The 2012-2016 five-year capital improvement program (CIP) totals $294.4 million, 42% of which is funded by state and federal grants. The authority anticipates additional bond issuance of $25 million to fund a stormwater/de-icing facility in the near term.

WHAT CAN TRIGGER A RATING ACTION:

--Management's ability to improve financial flexibility and further increase liquidity may enhance credit quality going forward.

--Continued growth in enplanements and related revenues that results in a stable CPE is important to maintain a competitive cost profile.

--A material reduction in seats or dramatic loss in enplanements could materially impact financial flexibility.

SECURITY:

Bonds are secured by the net revenues generated from the operations of the airport.

CREDIT UPDATE:

Recent enplanement growth has signaled stabilization of traffic levels and established a new enplanement base of 4.1 million following the de-hubbing of US Airways. Traffic is now primarily O&D, making it less susceptible to the volatility of any one airline. The economic developments and stability of the Pittsburgh region is expected to fuel a stable enplanement base going forward. However, year to date February 2012 is showing decline in enplanements of 4.8% largely due to the terminations of Southwest's route to Philadelphia and Frontier's route to Milwaukee in January. The traffic consultant report anticipates traffic will decrease by 3.2% in 2012 followed by 1.3% average annual growth in the near term. Fitch will monitor for further capacity reductions from the airlines.

Operating revenues in 2011 increased by 3.8%. Non-airline revenues which represent approximately 36% of total operating revenues have increased by 6.0% partly attributable to increased traffic and adjustments to parking rates. The authority also implemented a customer facility (CFC) charge of $3.00 in June 2011 and collected $3 million in CFC revenues in fiscal year 2011. Management expects to collect approximately $5 million in CFC revenues annually. In addition, the authority benefits from gaming revenues assigned to the airport under the gaming act. The authority expects to receive $12.4 million annually for the next eight years.

The external infusion of gaming revenues has allowed the authority to stabilize and avoid further increase to an already high CPE of $14.97 in 2011. The traffic consultant forecast assumes a slight enplanement decrease in 2012 followed by steady growth and moderate expense growth generating adequate senior debt service coverage slightly below 1.5x and CPE ranging from $14 to $16 in the near term. Fitch's stress sensitivity scenario assumes 7% & 5% enplanement declines in 2012 and 2013, respectively, and moderate expense growth. This scenario assumes CPE will grow to $18 in 2015/2016 and debt service coverage ranges between 1.29x and 1.46x.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--Rating Criteria for Infrastructure and Project Finance, Aug. 16, 2011;

--Rating Criteria for Airports, Nov. 28, 2011.

Applicable Criteria and Related Research:

Rating Criteria for Infrastructure and Project Finance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648832

Rating Criteria for Airports

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=656970

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