FITCH RATES UPCOMING LOS ANGELES INTERNATIONAL AIRPORT BONDS “AA,” REVISES OUTLOOK TO “STABLE”

            Los Angeles World Airports (LAWA) announced that Fitch Ratings recently assigned an “AA” rating for LAWA’s upcoming issuance of $237 million senior revenue bonds 2012 series ABC on behalf of Los Angeles International Airport (LAX).  Fitch re-affirmed the airport’s existing $2.66 billion parity senior revenue bonds at “AA” and $782.5 million subordinate revenue bonds at “AA-.”  Fitch also revised its rating outlook for all bonds to “stable” from “negative.” 

            According to Fitch Ratings, a global agency that provides independent analysis and credit ratings of financial securities , the upgraded outlook to “stable” is due to LAWA’s implementation of a new rate agreement with airlines at LAX that will provide strengthened cost-recovery terms as LAX moves forward on a $6.9-billion capital spending plan with additional leverage over the next five years.  Fitch also attributed the “stable” rating outlook to LAWA “management demonstrating successful execution of its capital program as noted by the progress of the Bradley International Terminal Project.”  The “stable” rating also “…reflects a continuation of favorable trends in operating and financial performance evidenced by both solid traffic growth (up over four percent in both fiscal years 2011 and 2012 (years ending June 30, 2011, and 2012), resulting in high overall debt-service coverage levels of 2.5 times.”

            "It was our goal to have the negative outlook removed,” said LAWA Executive Director Gina Marie Lindsey.  “We're happy that Fitch has recognized our significant efforts in managing LAX’s finances and capital improvement program."

            According to Fitch, some of the key drivers resulting in the improved “stable” ratings outlook are:

• LAX is a “large gateway airport with resilient traffic base” and air service is providedd by a highly  diverse mix of domestic and foreign-flag air carriers where one airline does not dominate the air traffic volume.  This level of diversity was called out as a “particular strength of the credit.”

·         LAWA’s establishment of a new tariff structure and 10-year rate agreements with LAX airlines beginning January 2013 that brings more equalization and uniformity in rates and charges to airlines so that LAWA can recover most of its operating and capital financing costs at all but one of the nine LAX terminals.  These agreements also are expected to enhance LAWA’s control of most of the terminal spaces.

·         Conservative debt structure whereby all the existing senior and subordinated long-term airport debt is fixed-rate, thus minimizing the risk of future fluctuations in debt-interest costs

·         “Strong financial metrics” and “solid” debt-service coverage (over 2.5 times of senior and subordinate debt) and liquidity of over 430 days cash on hand. The projected coverage and leverage of debt to cash flow available for debt service “are not expected to be pressured even under conditions of flat to moderate traffic growth.” 

·         Continued progress on the LAX airport capital improvement program “is expected to result in a higher leverage position relative to the historical fiscal position and similarly lead to rising cost-per-enplanement (CPE) levels above $20.

            The Fitch Ratings report can be viewed here.

About Los Angeles International Airport (LAX)

            LAX is the sixth busiest airport in the world and third in the United States, offering more than 600 daily flights to 91 domestic cities and more than 1,000 weekly nonstop flights to 56 cities in 32 countries on nearly 75 air carriers.  It ranks 14th in the world and fifth in the U.S. in air cargo tonnage processed.  In 2011, LAX served more than 61.8 million passengers, processed over 1.8 million tons of air cargo valued at nearly $80 billion, and handled 603,912 aircraft operations (landings and takeoffs).  LAX is part of a system of three Southern California airports – along with LA/Ontario International and Van Nuys general aviation – that are owned and operated by Los Angeles World Airports, a proprietary department of the City of Los Angeles that receives no funding from the City’s general fund.