DBRS Confirms Ottawa Macdonald-Cartier International Airport Authority at A (high)

DBRS has today confirmed the rating of the Revenue Bonds issued by the Ottawa Macdonald-Cartier International Airport Authority (the Authority) at A (high) with a Stable trend. Similar to airports across the country, the economic downturn has reduced traffic levels at Ottawa International Airport, but the Authority continues to prudently manage costs and benefits from having completed its major capital program last year before traffic began to erode.

After ending 2008 with robust traffic growth of 6.1%, the recession caught up with the Authority reducing passenger traffic by 5.3% in the first half of 2009. However, EBITDA remained sound at mid-year, remaining at the 2008 level thanks to cost containment initiatives taken by management including deferring non-essential maintenance and delaying filling vacant employee positions. Going forward, the Authority is expected to maintain a generally sound operating profile supported by prudent budgeting, an absence of major spending programs and a stable outlook for the regional economy.

The last major projects were part of Phase II of the Authority’s Airport Expansion program and were completed at the end of 2008, on time and on budget. Given the absence of any major project planned on the medium term horizon, debt should incrementally decline to roughly $150 per enplaned passenger by 2012 from its peak of $172 reached in 2007. A long-term master plan includes several sizeable projects, most of which are unlikely to be built for another ten years. As such, no new material debt needs are anticipated for the foreseeable future, short of possible modest draws on the line of credit for initiatives such as a parking garage expansion. For 2009, weaker traffic driven revenues are projected to put pressure on the DSCR, which is still expected to be a sound 1.6 times, after which point the DSCR should gradually strengthen with traffic in the coming years.
Along with all Canadian airport authorities, Ottawa International Airport Authority has experienced traffic declines over the past 10 to 12 months from the global economic recession. Moreover, even though economic conditions are showing signs of improvement in recent months, airlines are still in a precarious situation and forecasters generally expect the recovery to be slow, which is likely to translate into only modest traffic growth through 2010. However, DBRS notes that the Authority is one of the best positioned among large Canadian Airports to weather the negative traffic conditions given its low aeronautical fees, the absence of new major capital projects planned for the foreseeable future and the high proportion of Origination & Destination (O&D) passengers at the airport.

Note:
All figures are in Canadian dollars unless otherwise noted.

DBRS ratings on Canadian airport authorities and related infrastructure providers are primarily based on the regulatory framework in place, the strength of the service area of the rated entity, as well as its operating track record and the affordability of its debt burden.

This is a Corporate (Public Finance) rating.