Fitch Affirms Allegheny County Airport Authority Revenue Bonds at 'BBB', Rating Watch Negative

January 08, 2004 09:52 AM US Eastern Timezone 

Fitch Affirms Allegheny County Airport Authority Revenue Bonds at 'BBB', Rating 
Watch Negative 

CHICAGO--(BUSINESS WIRE)--Jan. 8, 2004--Fitch Ratings affirms the 'BBB' rating 
on Allegheny County Airport Authority (the authority), Pennsylvania's 
approximately $676.2 million of outstanding revenue bonds issued for Pittsburgh 
International Airport (the airport). The rating remains on Rating Watch 
Negative reflecting the uncertainty regarding US Airways' (the airline) 
continued use of the airport as a hub in its domestic route network. 

On Jan. 5, 2004 the authority signed a tentative agreement with the airline 
regarding its use of the airport. Under the agreement US Airways entered into a 
long-term lease for 10 gates and a month-to-month lease for an additional 40 
gates. Additionally, a 3-year lease, which may be cancelled after a year with 
penalties, has been added for maintenance and other facilities at the airport. 
This tentative agreement replaces the airport lease US Airways rejected as it 
emerged from bankruptcy protection in March 2003. 

Fitch downgraded the rating for the authority's bonds to 'BBB' from 'A-' on 
April 30, 2003, after US Airways rejected its previous lease, effective Jan. 5, 
2004, and indicated it would substantially reduce its operations at Pittsburgh 
unless the authority addressed its concerns regarding the financial burden 
associated with debt issued for terminal improvements at the airport. 

The airline operates its second largest domestic hub at the airport and 
accounted for approximately 83% of total passenger volume in 2002. As the 
airport operates under the residual rate setting methodology, the potential 
loss of the US Airways' hub poses serious financial implications to the other 
signatory airlines serving the airport and the authority. While the airport's 
fiscal 2002 cost per enplaned passenger equaled a competitive $7.26, Fitch 
estimates the diminished revenues associated with the potential loss of US 
Airways' connecting traffic, which accounted for approximately 60% of total 
enplanements in 2002, would more than double this figure. Should US Airways 
eventually implement a significant adjustment to its Pittsburgh operations, the 
resultant reduction in the authority's financial flexibility would likely lead 
to a further downgrade of the authority's credit rating. 

As part of the tentative agreement, US Airways committed to maintaining its 
current level of operations through September of this year in order to allow 
further negotiations with the authority, as well as county and state officials, 
regarding the airport's cost structure. Fitch continues to monitor developments 
at the airport, and will provide updates to investors as the situation warrants.

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