"Fitch Places Lambert-St. Louis Int'l Airport on Rating Watch Negative"

Friday, July 18, 2003

Fitch Places Lambert-St. Louis International Airport Ratings on Rating Watch
Negative
Business Wire


    CHICAGO--(BUSINESS WIRE) -- Fitch Ratings places the 'A-' rating for the
City of St. Louis, Missouri's approximately $533.2 million of outstanding
airport revenue bonds issued for Lambert - St. Louis International Airport
(the airport) on Rating Watch Negative. This action reflects American
Airline's (American or the airline) announcement on July 16 that it will
reduce the scope of its operations at the airport effective Nov. 1, 2003.
Fitch has maintained a Negative Rating Outlook for the airport since Oct.
15, 2001, due to the financial difficulties of American and the potential
for operational changes at the airline.

    The 'A-' rating reflects the airport's central location in the national
hub and spoke aviation system, its competitive cost structure and control
over gate assignments, its diversified regional economic base, and
management's proactive response to the financial impact of the airline
industry's downturn. Credit concerns center on the dominant position of
American (senior unsecured debt rated 'CCC+', outlook negative, by Fitch
Ratings), which utilizes Lambert to compliment its larger hubs at
Dallas-Fort Worth International and Chicago-O'Hare International airports
and served 77% of total enplanements at the airport in 2002.

    American's planned operational changes at St. Louis include a reduction
flights to 207 daily departures from 417. The airline intends to reduce
mainline flights to 53 daily departures from 213 at present, with the
remaining activity assigned to its American Eagle and American Connection
regional affiliates. While these schedule adjustments represent slightly
more that half of American's current operations, the airline's overall
capacity at the airport will decline by a greater percentage as smaller
regional jets provide an increasing proportion of service.

    The operational changes are likely to result in diminished financial fle
xibility at the airport resulting from lower landing fee collections as the
fleet changes from mainline jets to lighter regional aircraft and reduced
concession receipts as passenger volume declines. Fitch intends to meet with
airport management within the next few weeks to determine how they plan to
adjust to the service reductions and what budget actions they intend to
implement in order to maintain the airport's financial position.

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