Regional News

Fitch Gets Negative on Three Airports

BRADENTON, Fla. — Fitch Ratings on Friday revised the outlook to negative on three major U.S. airports in the wake of the Chapter 11 filing by American Airlines and its affiliate, American Eagle.

The bankruptcy of the nation's third-largest carrier "poses only minor immediate risks to most general airport revenue bonds," though credit concerns exist for airports where American has major connecting hubs, according to analyst Seth Lehman.

Fitch placed negative outlooks on $6.5 billion of revenue bonds issued for Chicago's O'Hare International Airport, $4 billion of joint revenue improvement bonds at Dallas-Fort Worth International Airport, and $6 billion of revenue bonds issued for Miami International Airport.

"Credit concerns may increase during the course of American's bankruptcy proceedings should the reorganization process lead to operating decisions that reduce or reallocate the carrier's schedule," Lehman said.

Fitch affirmed its ratings at all three airports: Chicago's AA-plus first-lien, AA second-lien, and A-minus third-lien ratings; Dallas-Fort Worth's A-plus rating; and Miami's A rating. In addition, Fitch affirmed its A rating and stable outlook on Chicago's $812.7 million of bonds backed by passenger facility charges.

Analysts have long held concerns about American's concentrated market share at its major hubs, the largest of which totaled 85% of Dallas' total enplanements in fiscal 2011 and more than 68% at Miami International, which is designated MIA.

Miami currently serves as a strategic hub for Latin American operations, and nearly half of the total traffic serves international passengers, Fitch said.

The negative outlook by Fitch could cost an additional one or two basis points if MIA was in the market to sell bonds, according to chief financial officer Anne Syrcle Lee.

In addition to being the top revenue producer for MIA, American is a major financial backer of the airport's $2.9 billion terminal renovation project, which is part of a $6.49 billion, largely bond-financed capital improvement plan.

Miami-Dade County, which owns the airport, has a $25 million claim listed on American's Chapter 11 filing. The $25 million is due to the county in varying amounts between 2012 and 2014 for the terminal project. Another $3.7 million trade debt claim also is listed.

"We do not expect any change in American Airlines' operations at MIA," Lee said. "We are one of American Airlines' most profitable hubs." The airline is current in the payment of its obligations, and no disruption in payments going forward is currently anticipated, she said.

"We do not view this bankruptcy filing as having a material adverse effect on the airport," Lee said. "However, it is worth noting that all our leases are month-to-month and cancellable on 30 days' notice."

American said on its website following the bankruptcy filing that it intends "to maintain a strong presence in domestic and international markets, including our cornerstones in Dallas-Fort Worth, Chicago, New York, Miami, and Los Angeles."

It is not clear what impact the bankruptcy could have on other initiatives, such as American Airlines Arena where the National Basketball Association's Miami Heat play. American pays $2.1 million a year for the naming rights in a 20-year agreement that runs through 2019.



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