DBRS Confirms Ratings of Vancouver Airport Authority at AA (low)

DBRS has confirmed the Vancouver Airport Authority’s (VAA or the Authority) Issuer Rating at AA (low) and its Senior Debentures rating at AA (low), both with Stable trends. Although a soft global and domestic economic outlook have tempered traffic growth expectations, the rating confirmations reflect the Authority’s continued solid financial performance and relatively low debt burden. Sizeable levels of annual capital expenditures are planned for the next decade which will increase debt levels and somewhat weaken coverage ratios; however, the financial metrics are still anticipated to remain favourable compared with other DBRS-rated peers.

Enplaned passenger traffic rose by 3.3% in 2012, placing traffic growth in the middle of the range amongst major Canadian international airports for that year. EBITDA also rose by 12.6% to $223.7 million on the strength of an Airport Improvement Fee (AIF) increase to $20 from $15 implemented in May 2012, overcoming the effect of VAA’s Gateway Incentive Program which froze aeronautical fees at 2010 levels until 2015 for 22 carriers who signed up for the program. Passenger traffic figures declined by 0.1% during Q2 2013 relative to the same period in the prior year, with deteriorations particularly coming from the transborder and international sectors over the early winter and spring months of 2013. However, traffic growth began to show improvement during June, July and August 2013, and the Authority anticipates that growth will reach 1.6% by year-end. A modest gain in EBITDA is also projected for 2013, primarily influenced by the full year impact of the AIF rate increase as well as growth in other non-aeronautical revenue streams.

Total debt decreased by 0.3% to $553.8 million in 2012, or $63 per enplaned passenger, owing to slower-than-anticipated capital spending in the year. The Authority is ramping up its capital program, and anticipates $1.76 billion in spending between 2012 and 2021. As a result, debt is expected to rise annually, peaking at $660 million by 2015, or an estimated $71 per enplaned passenger, a level that would continue to be appropriate for the rating.

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

This rating is endorsed by DBRS Ratings Limited for use in the European Union

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