Fitch Comment: Effect of NWA & DAL's Financial Difficulties on Domestic Airport Credits

CHICAGO--(BUSINESS WIRE)--Aug. 25, 2005--Fitch views the growing financial turmoil at Northwest Airlines, Corp. (Northwest or NWA, Fitch issuer default rating of 'CCC') and Delta Air Lines, Inc. (Delta or DAL, Fitch issuer default rating of 'C') as posing minimal short-term credit concerns for the respective airline's domestic connecting hub airports. However, considerable long-term credit concerns may arise should either carrier implement significant operational changes, enter into a corporate merger, or be forced into liquidation.

Fitch's ratings for the two carriers' major domestic connecting hub airports are as follows:

Minneapolis St. Paul International Airport (MSP)

-- Minneapolis-St. Paul Metropolitan Airports Commission, approximately $942 million senior lien airport revenue bonds 'AA-', approximately $848 million junior lien airport revenue bonds 'A';

-- Northwest and its affiliates represented 80.0% of total enplanements in 2004, while connecting passengers accounted for 54.8% of total airport traffic.

Detroit-Wayne County Metropolitan Airport (DTW)

-- Wayne County Airport Authority, approximately $2.2 billion airport revenue bonds 'A', approximately $89.2 million junior lien revenue bonds 'A-';

-- Northwest represented 79% of total enplanements in 2004, with connecting passengers accounting for 56% of the airport's total traffic.

Atlanta Hartsfield-Jackson International Airport (ATL)

-- City of Atlanta, approximately $2.2 billion senior lien airport revenue bonds 'A+', approximately $1.1 billion junior lien and passenger facility charge revenue bonds 'A';

-- Delta and its affiliates represented 78% of total enplanements in 2004, with connecting passengers accounting for 67% of the airport's total traffic.

Cincinnati/Northern Kentucky International Airport (CVG)

-- Kenton County (Kentucky) Airport Board, approximately $360 million airport revenue bonds 'A';

-- Delta and its affiliates represented 95% of total enplanements through July 2005, with connecting passengers accounting for 72% of the airport's total traffic.

Northwest continues to operate its full schedule of flights, although cancellations and delays have been reported, as a strike by the Aircraft Mechanics Fraternal Association (AMFA) enters its sixth day. With passenger volume remaining strong throughout the Northwest system, the immediate financial effect on airports is muted by the continued demand for concession, parking, and other non-airline related services. These revenue sources may be affected should the effectiveness of the airline's contingency plan erode over time, leading to a greater number of passengers switching to other carriers than reported to date.

Fitch does not expect a significant short-term change in Northwest's operations should its financial situation eventually lead to a filing for protection under chapter 11 of the U.S. Bankruptcy Code. This reflects recent experience with airline bankruptcies, in which the debtor carriers continued their full schedules, at least through the initial stages of the court proceedings. Fitch has spoken to management at both MSP and DTW regarding their preparedness for such an eventuality, with both airports reporting that Northwest is current on all payments under its use and lease agreements. Furthermore, management at MSP reports the airport currently holds approximately $67 million in unrestricted cash, while management at DTW indicates that the airport holds $82.8 million of unrestricted cash with the ability to tap $15 million remaining on an operating line of credit, indicating the respective airports have the resources to manage through a short disruption in service.

Fitch also recently spoke to management at ATL and CVG, both of which serve as major connecting points in Delta's system, in light of that airline's financial situation. Again, Fitch does not expect any significant operational changes in Delta's network over the short term should that airline seek protection under chapter 11. As with the Northwest hubs, both ATL and CVG indicate Delta is current on its obligation under its use and lease agreements, which should minimize any prepetition amounts due. Management at ATL reports the airport had approximately $481 million of unrestricted cash on hand at 2004 fiscal year-end, while CVG indicates it holds approximately $35.8 million of cash to support operations should that become necessary.

In the case of all four airports, credit concerns could increase over time should either airline's financial situation worsen. Furthermore, should one or both carriers enter bankruptcy proceedings, the potential for significant alterations to their operations may increase as they implement strategies to reorganize their business model and attract outside financial support. A merger or liquidation may also lead to the loss of connecting traffic at one or more airports, which other airlines may be slow to replace based on their own network operating needs and financial situation. Thus Fitch will continue to provide market commentary on how the airline industry's precarious financial situation affects credit quality of the nation's airports as conditions warrant.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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 Peter Stettler, 312-368-3176 (Chicago) Douglas Kilcommons, 212-908-0740 (New York) Jessica Soltz Rudd, 415-732-5616 (San Francisco) Christine Pollak, 212-908-0526 (New York, Media Relations) KEYWORD: NEW YORKINDUSTRY KEYWORD: TRAVEL BANKING AIRLINES TRANSPORTATION BOND/STOCK RATINGSSOURCE: Fitch Ratings