- Negative: Material losses or increased volatility in aviation activity, considering the particular exposures to Latin American economies and the operations of American Airlines.
- Negative: Operating costs that trend materially above current forecast parameters also leading to upward revisions to airline costs.
- Negative: Development of a new capital program that results in raising leverage metrics.
- Positive: Expansion of the traffic base of carrier mix diversification that leads to improved financial and cost flexibility may lead to a positive rating development.
Fitch Rates Miami-Dade County, FL’s Aviation Revs ‘A’; Outlook Stable
posted by AJOT | Jul 20 2016 at 10:07 AM | Air Cargo
Key Rating Drivers
The rating reflects the airport’s strong position in the south Florida market for both domestic and international air service. Miami stands-out as one of nation’s strongest international gateway airports with a dominant position for Latin American and Caribbean air services. The airport’s capital program is essentially complete while the financial metrics have exhibited stability in recent years. The rating also incorporates leverage at the upper end for U.S. airports which is expected to remain elevated for the foreseeable future.
Revenue Risk - Volume: Midrange
LEADING INTERNATIONAL GATEWAY AIRPORT: MIA is a well-positioned, leading international gateway airport to serve the building Latin American market. Despite shifting trends in the aviation industry and competition from nearby Fort Lauderdale Airport, overall traffic activity remains robust with approximately 21.4 million enplanements. The passenger base is well-balanced for both origination/destination (O&D) and connecting passengers as well as international and domestic operations. The airport serves as a hub for American Airlines, which serves 68% of total passengers.
Revenue Risk - Price: Stronger
RESIDUAL RATE SETTING: All of the airport’s costs are adequately covered by the use agreement rate setting mechanisms. The current agreement expires in 2017. Although airline costs have been relatively high, with the cost per enplanement (CPE) at approximately $20, Fitch expects stability at current traffic levels based on the combination of improving non-airline revenue trends as well as lower post-construction operating costs.
Debt Structure Risk: Stronger
CONSERVATIVE DEBT STRUCTURE: All of the airport’s debt is fixed rate and fully amortizing. Debt service is mostly level in the range of $380 to $400 million through final maturity in 2045. Nearly all of the debt service reserves are funded with cash and investments.
Infrastructure Development/Renewal Risk: Stronger
CAPITAL PROGRAM COMPLETION: Substantially all of the previous $6.5 billion capital program has been expended aside from a small amount of carryover projects and the overall budget has remained intact over the past several years. MDAD is now starting a more modest, multi-phase and demand driven terminal optimization program, with the first phase through 2018 sized at approximately $650 million. Only modest additional borrowings are foreseen over the near term.
HIGH LEVERAGE AND MODEST COVERAGE: Airport debt levels (approximately $275 per enplanement and 12x net debt/CFADS) in conjunction with past financings for a terminal driven capital program are very high. Leverage should slowly moderate over the next five years but still remain elevated at 11x - 12x. Debt service coverage ratios (DSCR) on a historical basis are stable at close to 1.54x but are supported by fund balance transfers and debt service offsets from passenger facility charge deposits.
PEERS: Peers to Miami Airport would include other major hubs and international gateway airports, such as Dallas-Ft. Worth (DFW, rated ‘A’) and Chicago O’Hare (rated ‘A’). Each of these airports has sizable traffic bases, significant hubbing operations and large debt burdens to support capital programs. Both DFW and O’Hare airports currently have similar leverage in the 12x range but lower CPE levels (DFW at near $10 and O’Hare at about $15).
Rating Sensitivities