S&P Rates LAX ‘AA’: Highest Airport Rating

SAN FRANCISCO (Standard & Poor's) Dec. 4, 2002-Standard & Poor's Ratings Services said today that it assigned its 'AA' rating, the highest rating Standard & Poor's Ratings Services has assigned to a U.S. general airport revenue bond, to $36 million in debt issued for Los Angeles International Airport (LAX) by the City of Los Angeles. The rating is based on the extremely strong financial and demand profile of the airport. The bonds, for which the outlook is stable, are scheduled to sell on December 12.

"LAX has-and for the foreseeable future will have-the dominant market position for domestic and international travel in a large, diverse, and relatively wealthy area," said Standard & Poor's credit analyst Mary Ellen Wriedt. "Despite declining enplanements following Sept. 11 and a slower recovery, the airport has maintained its liquidity and strong debt service coverage. Combined with its extremely low leverage and comparatively low cost structure for a large hub, it had the flexibility and resources going into the traffic downturn that other large hubs did not. In addition to the strong fundamentals, we don't expect those metrics changing over the intermediate-to-longer term, especially on a relative basis as other large hubs experience rising costs for infrastructure developments recently completed or now underway. That is why LAX stands apart from other strong airport credits in the 'AA' category," she added.

The debt is being issued on a fixed-rate basis to reimburse the department for prior pay-as-you-go capital expenditures. The airport has no other outstanding ratings with Standard & Poor's. The airport has a sizeable long-term master plan, the costs of which may reach $9 billion.

However, the specifics of scope, timing, cost, and funding have not yet been determined. Standard & Poor's expects that airport and city management will implement a plan that will preserve the airport's financial and operational strengths and will not issue more debt than the $183.2 million through fiscal 2006 they have indicated to Standard & Poor's.

LAX, Ontario International Airport, Van Nuys Airport, and Palmdale Regional Airport are owned by the City of Los Angeles and operated by the city's Department of Airports. LAX handles 71% of the domestic passengers in the LA CSMA (Orange County's John Wayne is next at 11.3%) and virtually 100% of all international passengers.

All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Fixed Income in the left navigation bar, select Credit Ratings Actions.

Contact: Mary Ellen Wriedt, San Francisco (1) (415) 371-5027
              Kurt Forsgren, San Francisco (1) (415) 371-5018

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