The Changing Cost of Doing Business. Kurt Krummenacker. Assistant Vice President Moody s Infrastructure Finance Team ACI-NA CARGO CONFERENCE

Transcription

1 The Changing Cost of Doing Business Kurt Krummenacker Assistant Vice President Moody s Infrastructure Finance Team ACI-NA CARGO CONFERENCE Atlanta, March 29,

2 1. About Moody s Ratings 2. Moody s Airport Ratings 3. Alternative Revenue Trends 4. Case Studies 2

3 MOODY S S INVESTORS SERVICE Moody s provides credit ratings, research and risk analysis to the capital markets Bond issue/update reports Provide annual U.S. Airport Sector Outlook and Medians Periodic research on topics of interest On-line database tools 3

4 CREDIT RATINGS ARE: Independent, quick comparative forecasts of credit quality 4

5 CREDIT RATINGS: Play a major part in many purchase decisions by investors Facilitate issuer access to financial markets Promote the evolution of new capital markets and industries 5

6 MOODY S S CREDIT RATINGS Aaa Strongest Creditworthiness Investment Grade Aa1/Aa2/Aa3 A1/A2/A3 Very Strong Creditworthiness Above Average Creditworthiness Baa1/Baa2/Baa3 Average Creditworthiness Non- Investment Grade Ba1/Ba2/Ba3 B1/B2/B3 Caa1/Caa2/Caa3 Below Average Creditworthiness Weak Creditworthiness Very Weak Creditworthiness Ca/C Weakest Creditworthiness 6

7 1. About Moody s 2. Moody s Airport Ratings 3. Alternative Revenue Trends 4. Case Studies 7

8 MOODY S S AIRPORT RATINGS Moody s Infrastructure Finance Team rates 170 debt instruments at 114 U.S. Airports Over $100 billion in debt Sector outlook stable since September, 2004 Airport analysts: Kurt Krummenacker, Maria Matesanz, Joshua Schaff, Tom Paolicelli, Patrick Ford, Omar Ouzidane, Bart Oosterveld 8

9 MOODY S S AIRPORT RATINGS: RATING DISTRIBUTION, MARCH % 30% % of Portfolio 25% 20% 15% 10% 5% 0% Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3 Ba1 Senior Bond Rating 9

10 ENPLANEMENT AND REVENUE GROWTH HAS IMPROVED CREDIT STABILITY IN RECENT YEARS % 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% ratings with a negative outlook ratings with a stable outlook ratings with a positive outlook 10

11 1. About Moody s 2. Moody s Airport Ratings 3. Alternative Revenue Trends 4. Case Studies 11

12 CREDIT CHALLENGES FOR U.S. AIRPORTS Weak, though slightly improving financial position of airline industry Uncertainties surrounding federal funding levels The return of capacity issues Rising costs of construction Uncertain interest rate environment 12

13 CHARACTERISTICS OF WELL-POSITIONED AIRPORTS Diversified revenue stream, below-average reliance on airline-derived revenues Strong local economy Solid financial liquidity Good control over both operating and capital costs 13

14 CHARACTERISTICS OF WELL-POSITIONED AIRPORTS Diversified revenue stream, below-average reliance on airline-derived revenues Strong local economy Solid financial liquidity Good control over both operating and capital costs 14

15 TYPES OF ALTERNATIVE REVENUES Aviation / Transportation Related Tourism/Hotels Business Park / Light Industrial Other 15

16 CREDIT CONSIDERATIONS OF ALTERNATIVE REVENUES Financial risk to airport No Borrowing No Speculative Businesses Certainty of revenue streams Development Contracts Long-term Leases Development Costs Small Capital Input Required Limited Additional Operating Expenses 16

17 1. About Moody s 2. Moody s Airport Ratings 3. Alternative Revenue Trends 4. Case Studies 17

18 CASE STUDY: EL PASO INTERNATIONAL Rated A2, Stable Outlook Stagnant Enplanement Growth 5yr CAGR = 0.4% Top two airlines 70% of enplanements Strong Revenue Growth 5yr CAGR = 6% 21% op. revenues from alternative sources Industrial park, golf course, strip malls 18

19 CASE STUDY: AUGUSTA COUNTY AIRPORT AUTHORITY Rated Baa3, Positive Outlook Declining Enplanements 5yr CAGR = -4.4% Top two airlines 97% enplanements Low debt requirements 68% op. revenue from alternative sources Aviation fuel sales 19

20 CASE STUDY: COLUMBUS REGIONAL AIRPORT AUTHORITY Rated A2, Stable Outlook Strong revenue trends Revenue 5yr CAGR = 3.3% Concession and parking revenue growth Rickenbacker Cargo Airport Cargo revenue growth % % Extensive development planned 20

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