"Fitch changes R.I. Airport Corporation outlook to negative"

Saturday, August 20, 2011

Rating service changes R.I. Airport Corporation outlook to negative
By Barbara Polichetti
The Providence (RI) Journal


WARWICK -- Fitch Ratings affirmed the Rhode Island Airport Corporation's
medium- grade investment status this week, but changed its outlook to
negative based on a "fiercely competitive" regional air travel market and
steadily declining passenger numbers.

"Passenger traffic has continued to decline since the last Fitch Review in
August 2010, albeit a slower 3.6 percent reduction," Fitch analysts wrote in
the report released this week. "Given the ongoing competition from nearby
Boston Logan Airport, Fitch believes that RIAC will be challenged to reverse
this tepid traffic trend."

Fitch kept the airport's investment rating at A-, which is a solid,
investment-grade ranking, although not in the top tier.

The change in outlook comes at a time when the airport may soon be borrowing
money as it prepares to put together financing for the planned extension of
its main runway and safety improvements to its secondary runway. 

The price of the project, which is pending final approval from the Federal
Aviation Administration, is estimated at about $167 million. Airport
officials have said that RIAC will apply for federal funding to cover some
of the costs and has not determined how much will need to be financed.

The airport's investment rating has remained stable, but also with a
negative outlook for about a year with another financial institution --
Moody's Investors Service.

 Moody's, which uses a different ranking system, rates the airport
corporation as "Baa1" with a negative outlook. It reaffirmed that ranking in
March. 

RIAC President Kevin Dillon said Friday that the negative outlook from Fitch
will not affect the airport corporation's ability to borrow or the cost of
issuing bonds, but the corporation will continue to exercise prudence when
considering any new debt burden.

"The main point is that we have been and will continue to be very judicious
about our finances," he said.

Dillon said the Fitch report's observations about declining passenger
numbers are an unfortunate reflection of the economy.

"I certainly think it's a reflection what's happening in the broader
economy," he said. "Let's face it, air traffic is dependent on good economic
conditions . during times like these people, are reluctant to use
discretionary income to fly away on vacation."

The Fitch report notes that while Green Airport's passenger decline has
slowed, there is "growing competitive pressures" from nearby Logan
International Airport. In 2009, Logan added Southwest Airlines - the second
largest carrier at Green - to its roster and ratcheted up the competition.

According to Fitch analysts, industry experts expect air travel numbers to
remain relatively stagnant this year and next, there "has not yet been a
clear sign of recovery."

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