DBRS Confirms Edmonton Regional Airports Authority at A (high)

DBRS has today confirmed the Edmonton Regional Airports Authority`s (ERAA or the Authority) Issuer Rating at A (high) and the rating on its Revenue Bonds, Series A at A (high), both with Stable trends. The ratings are supported by passenger growth that has outpaced all DBRS-rated airports in the last couple of years, a strong regional economy and debt metrics that have shown improvement since the conclusion of the five-year capital program at the end of 2012.

Passenger traffic has maintained its steady growth trend since the recession, rising 4.6% over 2013 following strong annual growth in 2012 of 6.4%. Traffic growth mirrored the economic growth of the municipal region, which posted a rise in real gross domestic product (GDP) of 4.6% in 2013 and 6.0% in the year prior. Transborder traffic has been the leading category for gains, propelled by increasing business and leisure travel to the western and southern United States. The momentum has continued so far in 2014, with traffic growth reported at 5.2% at the end of the first quarter. The Authority plans to increase the airport improvement fee (AIF) to $30 per enplaned passenger from $25 for flights leaving July 1, 2014, and onwards, which will provide a meaningful boost to EBITDA.

Debt rose slightly to $964.4 million in 2013 up 0.3% from year-end 2012. On the strength of solid traffic growth and the slowing pace of additions to debt, debt-per-enplaned passenger, a key leverage ratio tracked by DBRS for the sector, declined to $276 by year-end 2013 from its peak of $288 recorded in 2012. The debt service coverage ratio (DSCR) still remains depressed at 1.32 times in 2013, marginally lower than the 1.36 times recorded in 2012, but is poised to rebound in 2014. Planned new borrowing is expected to be limited to $20 million annually, reflecting reduced capital needs after the completion of the multi-year Expansion 2012 capital program. The Authority predicts that metrics should continue to improve driven by moderate and sustained traffic growth.

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

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

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.