BRADENTON, Fla. — Fitch Ratings downgraded Florida's Pensacola International Airport to BBB-minus from BBB primarily due to "financial underperformance" and airline consolidation risk.

Fitch rates $33.5 million in outstanding 2008 airport revenue bonds issued by the city of Pensacola, though there is about $72 million in parity debt outstanding.

The rating outlook was revised to stable from negative in connection with the Aug. 28 downgrade.

"The downgrade reflects the airport's financial underperformance relative to projections in recent years, and Fitch's view that PNS's traffic profile through the downturn and airline consolidation environment has become subject to more risk, particularly given the meaningful competition from nearby airports for passenger service already cited as a concern in the past," said Fitch analyst Charles Askew.

Pensacola airport's low financial flexibility in terms of its historical thin operating margins, high leverage, and low liquidity is more consistent with peers currently rated BBB-minus, the rating agency said.

"The stable outlook reflects improved financial margins in fiscal year 2013 and enhanced sources of non-airline revenues going forward, both factors which Fitch cited last year were necessary for the airport to retain an investment grade financial profile," Askew said.

The airport, in the Sunshine state's panhandle, serves a relatively small local market enplanement base of just over 758,000, and includes a mix of business, tourism, and military travelers, according to Fitch.

Carrier concentration remains elevated with Delta Airlines accounting for nearly half of total enplanements to a single destination — Atlanta.

Moody's Investors Service affirmed its Baa1 ratings on the airport revenue bonds, and stable outlook Aug. 26, while Standard & Poor's affirmed its BBB ratings March 26, while keeping the outlook negative on March 26.

S&P noted that the airport has bank bonds on par with its municipal bonds, as well as two privately placed revenue notes that "do not pose any contingent liability risk because there are no provisions that would make them immediately due."



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