Fitch Rates Miami-Dade County Airport Revenue Bonds 'A', Negative Outlook

March 04, 2004 12:06 PM US Eastern Timezone 

Fitch Rts Miami-Dade County Airport Revs 'A', Negative
Outlook 

NEW YORK--(BUSINESS WIRE)--March 4, 2004--Fitch
Ratings assigns an 'A' rating to Miami-Dade County,
FL's $400 million aviation revenue bonds, series 2004,
scheduled for negotiated sale during the week of March
29 through syndicate led by Bear, Sterns & Co. Inc.
Fitch also affirms the 'A' rating on Miami-Dade
County's approximately $2.8 billion in outstanding
aviation revenue bonds. The Rating Outlook remains
Negative. The current issue consists of: $201 million
aviation revenue bonds series 2004A (subject to the
Alternative Minimum Tax (AMT)), $167 million aviation
revenue bonds series 2004B (non-AMT) and $32 million
aviation revenue bonds series 2004C (non-AMT). 


Semiannual interest payments commence Oct. 1, 2004,
with final maturity on the 2004A bonds in 2036, 2004B
bonds in 2037 and 2004C bonds in 2011. The bonds are
secured by a senior lien on the net revenues of
Miami-Dade County's Port Authority's properties (PAP),
which include assets at Miami International Airport
(MIA or the airport) and to a lesser extent cargo and
aviation facilities located at the County's other
smaller airports for general aviation and
flight-training operations. 

Proceeds will refinance approximately $326 million in
commercial paper notes that originally financed a
portion of the airport's ongoing $4.8 billion capital
improvement program (CIP), refund $32 million series Y
bonds, and pay costs of issuance. 

The 'A' rating reflects the airport's stable market
share in Florida, role as the nation's key
international gateway to the Caribbean and Latin
America, significant cargo operations that offset
costs normally borne by passenger carriers alone,
diverse mix of domestic and international passenger
and cargo airlines, and improved financial performance
due to management's cost control measures. 

Long-term credit concerns center on the scope of the
airport's CIP, which results in significant debt
service obligations and a rising cost structure,
increasing competition within the south Florida market
for domestic passengers, and the airport's reliance on
international travel for a large proportion of total
passenger traffic. 

The negative rating outlook reflects the continued
financial difficulties experienced by the domestic
airline industry, particularly American Airlines, the
airport's largest carrier, as well as the uncertainty
in global economic conditions that could result in the
airport failing to obtain forecasted enplanements and
further exacerbate the airports high cost structure. 

The airport served a total 14.7 million enplaned
passengers during fiscal 2003, up slightly from fiscal
2002 but below the 2001 figure of 16.5 million and the
airport's record level of 17.2 million in 1997. In FY
2003, domestic traffic increased by 2.3%, to 7.79
million enplanements from 7.62 million in FY 2002.
Conversely, international traffic decreased 1.6%
during this period, to 6.95 million enplanements from
7.06 million, reflecting global economic conditions
and the outbreak of the Iraq War. Based on economic
growth in South America, continued recovery in the
domestic economy, and an improving environment for the
aviation industry overall, the airport's feasibility
consultant projects enplanements will increase at a
4.2% average annual rate through 2008. 

The airport is served by a diverse mix of airlines,
including 20 domestic carriers, 38 foreign flag
airlines, and 20 all cargo carriers. However,
reflecting its role as the nation's principal carrier
serving Latin America, American Airlines (American)
and regional affiliate, American Eagle, accounted for
approximately 58% of the airport's total enplanements
in fiscal 2003. After reducing the number of daily
flights to 166 from 179 due to the downturn in traffic
after the events of Sept. 11, American has steadily
returned service and now operates 195 daily flights
and continues to actively pursue additional routes.
While the airport plays an instrumental role in
American's overall operations, the airline's
significant presence and recent financial difficulties
represents a credit concern. 

The airport recorded improved financial operations
over the past several years, as operating revenues
increased at a 2.6% average annual rate since 1998.
With management restraining spending to a modest 0.7%
average annual growth rate during this period,
coverage of debt service provided by net revenues
improved to 1.44 times (x) in fiscal 2003 from 1.26x
in 1998. Based on the enplanement forecast and the
financial structure of the airport, and allowing for
$2.3 billion in additional debt through 2010, the
consultant projects coverage from net revenues to
exceed 1.3x through 2015. 

The airport's $4.8 billion CIP is designed to meet the
airport's needs through 2015. The airport plans to
finance the program through a mix of sources including
federal grants, state grants, passenger facility
charge (PFC) receipts, and approximately $2.4 billion
in additional general airport revenue bonds. Based on
the scope of the capital plan, and incorporating the
enplanement forecast, the consultant projects that the
airport's cost per enplaned passenger will rise to
$32.93 in fiscal 2015 from $14.58 in fiscal 2003. The
airport's forecasted CPE is considerably above those
of comparable domestic airports, and represents a
long-term credit concern. 

However, a portion of the airport's costs represent
higher capital expenditures for international gates,
which are offset by higher yields attained by the
airlines for international travel, as well as expenses
incorporated in rates and charges for services
provided by the airport that are usually assumed by
the airlines at other facilities, which reduce the
impact of the airport's high cost structure on an
airline's overall operating costs at the airport.

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