Fitch Ratings Assigns 'AA' Rating to Metro Washington Airport Authority

NEW YORK--(BUSINESS WIRE)--Sept. 13, 2005--Fitch Ratings assigns an 'AA-' rating to Metropolitan Washington Airport Authority (MWAA, or authority), D.C. as follows: -- $10.16 million of airport system revenue refunding bonds, series 2005D...


Offsetting the moderate airline concentration risk is the strong origination and destination (O&D) profile of traffic at both IAD (70%) and DCA (87%), favorable demographic trends within the service areas of both airports, and an overall competitive cost and debt profile. Air carriers recognized these strengths during 2004 and expanded operations. At Dulles, enplanements increased by a noteworthy 35% to 11.3 million, reflecting a surge in demand stimulated by low fares of Independence Air and the retaliatory pricing and service tactics of competing carriers. As MWAA management recognizes annual enplanement growth at this level is neither realistic nor sustainable, capital planning at IAD contemplates only modest (4%) traffic growth. National's traffic rebounded by 12% to approximately eight million enplanements during 2004, a level exceeding the peak recorded prior to Sept. 11, 2001. However, future traffic growth is expected to be more modest at DCA (growing generally between 2%-3%), reflecting its status as an FAA slot-controlled facility.

The authority's experienced management team successfully meets the challenges of implementing a large capital program ($3.9 billion) while also consistently generating healthy financial results. During 2004, the authority generated an operating ratio of 43%, which is consistent with authority performance prior to Sept. 11, 2001. Results recorded for the first seven months of 2005 are similar, with an operating ratio of 44% generated on total operating revenues of $277 million. Debt service coverage equaled a healthy 1.7 times (x) during 2004, providing cushion for bondholders above the 1.25 times (x) rate covenant. As of Dec. 31, 2004, the authority maintained unrestricted liquidity totaling approximately $240 million, equaling a healthy 8% of pro forma debt. Management maintains strong oversight on accounts receivable from both bankrupt and nonbankrupt airlines serving DCA and IAD.

Airline-related costs are expected to rise as the authority issues additional debt through 2011 to finance completion of the CCP. During 2009, the year during which all such debt will have been issued ($1.2 billion), cost per enplaned passenger (CPE) levels will approach $22 at Dulles, up considerably from the $12.34 reported during fiscal 2004. Likewise, at National, CPE will rise to above $14 from the currently competitive $11.84. Under a stress case where IAD would lose its hub status and experience a 75% decline in connecting enplanements and where DCA would experience no traffic growth, CPE would increase to approximately $37 at IAD and $16 at DCA. Though well above historical norms, Fitch notes that the assumptions underpinning the stress case are extremely conservative and recognizes that the modular nature of the CCP allows for cancellation or deferral of projects if needed.

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.

CONTACT: Fitch Ratings Douglas J. Kilcommons, 212-908-0740 (New York) Peter Stettler, 312-368-3176 (Chicago) Christine Pollak, 212-908-0526 (Media Relations, New York) KEYWORD: WASHINGTON NEW YORKINDUSTRY KEYWORD: TRAVEL BANKING AIRLINES TRANSPORTATION BOND/STOCK RATINGSSOURCE: Fitch Ratings

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