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 reduced traffic at Ottawa International Airport (YOW) in 2009, although the Authority continues to prudently manage costs and completed its major capital program in 2008.

All major Canadian airport authorities experienced traffic declines in 2009, although at -2.5%, the Authority’s downturn was the most modest. While revenues declined by 3.1%, operating expenses decreased by 6.7% as a result of significant ground rent savings, less severe winter conditions and careful cost management, leading to a 2.1% increase in EBITDA for 2009. Traffic reversed its trend in the fourth quarter of 2009 and continued to recover in the first half of 2010, with gains of 5.9% year-over-year contributing to an increase in EBITDA of 5.6% for H1 2010 versus H1 2009. Going forward, the Authority is expected to maintain a sound operating profile supported by prudent budgeting, a moderate debt burden, the absence of major capital projects in the near- to medium-term and a stable outlook for the regional economy.

The Authority completed its last major projects as part of Phase II of the Airport Expansion program in 2008, on time and on budget. The Authority is planning some capital projects for the near term, including a $33 million parking garage expansion, upgrades to its customs area and numerous small projects which are expected to be partially financed by draws on its revolving lines of credit. The long-term master plan includes several sizeable projects, most of which are unlikely to be built for some time. Nonetheless, DBRS expects that the Authority would continue to make prudent use of debt and to undertake projects which are logical and affordable, and views the Authority as well-positioned in the rating category.

For 2010, improved traffic-driven revenues are expected to be offset by increased spending and debt service, keeping the debt service coverage ratio (DSCR) essentially flat at 1.6 times. Over the medium term, the Authority expects the DSCR to gradually strengthen as traffic growth is expected to drive revenues at a faster pace than the growth of expenses. However, DBRS expects traffic to potentially remain volatile over the near term, dependent upon the breadth and depth of economic recovery.

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

The applicable methodology is Rating Canadian Airport Authorities, which can be found on our website under Methodologies.