LOS ANGELES — Moody’s Investors Service downgraded Ontario International Airport’s revenue bonds to Baa1 from A3 affecting $67.1 million in outstanding bonds. The outlook is stable.
Ontario officials have been battling with Los Angeles World Airports for the past three years in efforts to regain local control of the airport. LAWA, a Los Angeles city agency, controls the Ontario airport, Los Angeles International Airport and two other regional airports in Los Angeles County.
The downgrade and rating are based on the airport’s weakened market position due to a period of sustained enplanement declines that has continued through August 2013, Moody’s analysts said a report released Oct. 23.
“The downgrade reflects Moody’s belief that the airport’s fundamental market position has changed because strong enplanement declines have continued even as area economic conditions have begun to recover,” Moody’s analysts said.
Ontario lost almost 40% of its 7.2 million annual passengers from 2007 to 2012, according to a report released in August by consulting firm Oliver Wyman. A further 8% decline is expected this year, according to the report, which would bring the volume of travelers to slightly less than four million.
This weakened market position, and the airport’s elevated cost per enplanement, also makes the concentration in Southwest Airlines a growing concern, Moody’s analysts said. Southwest Airlines accounted for 53% of enplanements in FY 2013, according to the Moody’s report.
The stable outlook is based on the airport’s strong cash position relative to its debt outstanding and its current operating expenses, as well as its low capital needs for the foreseeable future, according to the Moody’s report.
The airport’s strengths include strong financial liquidity, which provides an ability to manage revenue declines and other risks, according to the report.
A return to enplanement growth that stabilizes the airport’s financial performance with internal financial liquidity remaining above Moody’s U.S. airport median could have a positive impact on the rating, analysts said. Continued enplanement declines that lead to net revenue debt service coverage falling below 1.0 times and/or a weaker financial liquidity profile well below Moody’s U.S. airport median could have a negative impact on the rating, analysts said.