Fitch Assigns 'A+' to Albuquerque, New Mexico Airport Bds Sr Lien Improv Bds; Sub Lien Taxable Rfdg Bds 'A'

February 12, 2004 04:10 PM US Eastern Timezone 

Fitch Assigns 'A+' to Albuquerque, New Mexico Airport
Bds Sr Lien Improv Bds; Sub Lien Taxable Rfdg Bds 'A' 

NEW YORK--(BUSINESS WIRE)--Feb. 12, 2004--Fitch today
assigned an 'A+' underlying rating to the City of
Albuquerque, New Mexico Airport Revenue Bonds Senior
Lien Improvement Bonds Series 2004B (AMT) and an 'A'
underlying rating to City of Albuquerque, New Mexico
Airport Revenue Bonds Subordinate Lien Taxable
Refunding Bonds Series 2004A. The bonds are expected
to price the week of February 23 through negotiation
led by Citigroup and Dain Rauscher Inc. 


At this time, Fitch also affirms its 'A+' rating
assigned to outstanding senior lien airport revenue
bonds (Series 1998 and Series 2001 Bonds). The Rating
Outlook is Stable. 

Proceeds of the Series 2004A Bonds are being applied
to refund approximately $20 million of variable rate
Series 2000B Bonds. Series 2004B proceeds will finance
approximately $30 million of planned projects included
as part of the Albuquerque International Sunport's
(ABQ or Sunport) $159 million five-year capital
program (FY 2004-FY 2008). The Series 2004A Bonds,
ranking on parity with approximately $95 million in
airport subordinate parity obligations, and the Series
2004B Bonds, ranking on parity with approximately $109
million in senior parity airport debt, are secured by
Net Revenues of ABQ. Approximately $233 million in
long-term debt will be outstanding following issuance
of the Series 2004A and Series 2004B Bonds. 

The ratings reflect the strong origination and
destination (90%) characteristics of ABQ's air trade
service area; a material lack of competition, with the
Sunport serving as the only airport in New Mexico
providing scheduled national service; and healthy
financial performance affording solid coverage of debt
service. Though ABQ has adequate operating capacity
and facilities, and is not expected to substantially
increase its debt load over the next five years, an
additional $129 million in capital program projects
are planned through FY 2008. Fitch expects that the
majority of funding for these projects will come from
a mix of airport equity and federal grants (63%);
though, an additional revenue bond issue may be needed
should planned funding sources not materialize.
Approximately $104 million in other proposed projects
are considered by ABQ to be 'demand driven' and will
be implemented only as activity levels warrant. 

Sunport passenger volumes, while being impacted over
the past two years by the events of September 11,
2001, the initiation of hostilities with Iraq, and the
continued national economic slowdown, are showing
positive momentum. Compared to an FAA reported 9.3%
national decline in passenger volumes between FY 2001
and 2002, ABQ experienced declines of just 3.4%, with
the more than 3 million passengers enplaned during FY
2003 representing approximately 95% of the FY 2000
enplanement level. Fitch believes the dominant
presence of low-cost, low-fare airlines at ABQ,
including that of market leader Southwest Airlines
(53% of total enplanements), bodes well for the
facility going forward. Consultant prepared
projections indicate 1.7% average annual traffic
growth through FY 2010 at the Sunport, estimates which
Fitch believes to be realistic, though highly
contingent upon continued national and regional
economic growth and minimal future disruption in
airline passenger service. 

ABQ continues to generate solid financial results and
debt service coverage, with net revenues amply
covering senior parity obligations debt service by an
average of 3.67 times (x) since FY 1999. Inclusive of
subordinate debt obligations, coverage levels ranged
from 1.78x (FY 2001) to 2.24x (FY 2003) --each year
well above the Ordinance dictated 1.10x minimum. An
additional strength of the credit is an experienced
management team, which successfully led the airport
through the September 11, 2001 crisis, and now
continues to plan proactively for the future. 

Credit risks going forward include a notable increase
in facility costs, measured by rising costs per
enplanements (CPE), and a fairly significant reliance
upon the operations of a single air carrier, albeit a
healthy one (Southwest Airlines), for greater than 50%
of enplanements. ABQ's CPE remained competitive during
FY 2003, though considerably above historic norms and
prior projections ($6.50 range), at approximately
$7.85. Projected CPE levels, which may approach $9.00
by FY 2007, are viewed as manageable by Fitch;
however, a failure of the Sunport to stabilize the
rapidly rising CPE going forward may yield rating
pressure. ABQ's ability to secure external funding for
the lion share of planned capital projects and to keep
additional bonding to a minimum going forward will be
of paramount importance to the maintenance of
competitive CPE's.

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