WASHINGTON — A combination of volume and price, offset by leverage, is the most important driver in Fitch Ratings’ airport portfolio, according to a new report released Monday.
The report was eight months in the making.
The report identifies five key rating drivers for airports. They are the resiliency of the passenger volume, the strength and competitiveness of the airports contractual framework, the airport’s approach to infrastructure renewal and development, the financial risk associated with the airport’s debt structure and the debt’s financial metrics, leverage and flexibility.
“The franchise value — a combination of volume and price — emerged as the strongest ratings driver,” said Scott Zuchorski, a director in Fitch’s global infrastructure group. “Leverage is also a key ratings component, with the overall debt level offsetting or bolstering franchise value.”
“Airports with a weaker volume or price attribute, but operating with very low leverage, may achieve an A rating,” he said. “Likewise, high leverage or a capital structure with significant market risk can serve to offset an otherwise strong franchise and constrain the rating.”
The report is the first publication to detail the rating drivers for each U.S. airport Fitch covers, said Elizabeth Fogerty, director of corporate communications. In the future, Fitch will provide an assessment of stronger, midrange or weaker for each of the five rating drivers.
Most of the airports in the Fitch portfolio earned A ratings, a fact the report attributes to “the sector’s relatively low credit risk and resilience through economic downturns.” A small number of airports earned AA ratings, including Los Angeles International Airport.
The report will help bring transparency to the airport rating criteria, Fogerty said.
