Moody's Investors Service said it has downgraded to A1 from Aa3 Metropolitan Washington Airport Authority's $5 billion of airport revenue bonds.
Moody's also assigned the A1 rating to MWAA's expected $204.7 million Series 2013A, $27.3 million Series 2013B, and $10.7 million Series C airport system revenue and revenue refunding bonds. The rating outlook is revised to stable.
The downgrade is based on MWAA's financial metrics which have remained narrower than historical levels and more commensurate with the A1 rating category. The A1 rating is based on MWAA's strong underlying fundamentals; strong market position; well-managed operations and the relative economic stability of the metropolitan Washington area. MWAA operates and maintains both National and Dulles airports.
The stable outlook and rating are based on the ability of the local economy to generate stable enplanement levels and the expectation of significantly higher cost per enplanement (CPE) and lower debt service coverage ratios (DSCRs) over the next five years.
MWAA projects that its CPE will remain over $27 at Washington Dulles International Airport (Dulles) and remain over $12 at Ronald Reagan Washington National Airport (National) beginning in FY2013.
At the same time the DSCR is forecast to generally remain below 1.35 times through FY 2018, a marked decline from 1.49 times in FY 2009.
Moody's believes MWAA is likely to outperform these projections; however, it expects MWAA's metrics will likely remain inconsistent with the Aa3 rating level during the forecast period.
The extent to which changes in spending by the federal government impacts the vitality of the metropolitan Washington economy, and how that affects enplanement growth rates have been a key determinant in the rating in the near term.
Enplanement growth was flat in FY 2012 and is up 1.3% in FY2013 indicating stability in demand, but growth has not been strong enough to return financial metrics to Aa3 levels. Further, Moody's expects airline industry contraction and changes in federal spending levels, which have only recently begun to take effect, will continue to limit growth as debt service requirements increase.