Memphis Airport Slips

Fitch Ratings last week downgraded the Memphis-Shelby County Airport Authority’s rating to A from A-plus.

The rating action affects $415.5 million of outstanding bonds secured by the net revenues of Memphis International Airport.

Fitch also revised the outlook to stable from negative.

“The downgrade reflects elevated concerns over financial flexibility and cost stability as a result of a measurable decline in overall enplanements tied to Delta Airlines’ phased reductions in connecting operations,” said Fitch analyst Scott Zuchorski.

Passenger traffic is projected to drop below four million based on daily flights, which translates to an enplanement loss of more than 30% from the peak levels in 2008, according to Zuchorski.

“Continued Delta service reductions remain an ongoing possibility and lends to uncertainty regarding future traffic levels,” he said, adding that the airport remains exposed to continued concentration from Delta.

Even with the loss of passenger traffic, Memphis remains among the world’s busiest cargo airports by tonnage with the presence of Federal Express Corp.’s world hub operations.

FedEx represents over 80% of the airport’s total landed weight.

Zuchorski said the airport’s moderate debt load is fixed rate and conservative with a steadily declining amortization profile.

The airport currently has no significant borrowing plans.

The authority’s bonds are secured by net revenues of the airport.

Fitch’s downgrade to A brings Memphis’ rating in line with the A2 assigned by Moody’s Investors Service.

Moody’s affirmed its rating last week, and maintained a negative outlook, citing potential negative impacts from further Delta’s service reductions as well as uncertainty surrounding the integration plans of Southwest Airlines and AirTran Airways.

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Transportation industry Tennessee
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