Morningstar DBRS Confirms Greater Toronto Airports Authority's Issuer Rating at A (high), Stable Trend

DBRS Limited (Morningstar DBRS) confirmed the Greater Toronto Airports Authority's (GTAA or the Authority) Issuer Rating at A (high) and its Commercial Paper (CP) credit rating at R-1 (low), both with Stable trends. The credit rating confirmations are based on GTAA's robust liquidity and business risk assessment and the improvement in financial metrics, which are commensurate with the A (high) credit rating.

KEY CREDIT RATING CONSIDERATIONS
During 2024, GTAA processed 46.8 million passengers, 4.4% more than in 2023, recovering to 92.5% of the 2019 total of 50.5 million passengers, in line with Morningstar DBRS' expectations. This was mainly driven by strong travel demand. Consequently, revenues increased significantly to $2.0 billion in 2024 from $1.9 billion in 2023, an increase of 4.7%, and 30% higher than 2019 revenues. Total operating expenses, as calculated by Morningstar DBRS, increased by 11.9%, mainly because of the increase in other operating expenses such as payment in lieu of taxes (due to higher passenger traffic); goods and services; and salaries, wages, and benefits (to support operational readiness and skill upgrades). EBITDA decreased slightly to $938.1 million from $960.3 million, because the higher revenues associated with the increase in operating activity were offset by the increase in operating costs (before amortization).

At the end of 2024, total debt, as per Morningstar DBRS' calculation, was $7.1 billion, $85 million more than one year earlier. The debt service coverage ratio (DSCR), as calculated by Morningstar DBRS, remained consistent with the previous year at 3.1 times (x), and total debt per enplaned passenger decreased to $305 from $315, which is commensurate with the current credit ratings.

Passenger volumes and flights during H1 2025 remained flat compared with the same period last year, reaching a total of 22.7 million passengers as of June 30, 2025 (0.1% increase). The marginal growth in passenger volume was driven by a 2.5% increase in domestic passengers partially offset by a reduction of 1% in the international sector, largely related to a decline in transborder travel. Passenger traffic was affected overall by the global economic and political landscape as well as extreme weather events in February.

During H1 2025, total revenues increased by 5.7% to $1,008.1 million compared with H1 2024, primarily because of the marginal increase in passenger volumes compared with last year, combined with higher aeronautical and airport improvement fee rates. EBITDA increased 3.9% to $477.8 million versus H1 2024 as a result of an increase in operating expenses driven by higher ground rent in line with growth in revenues and higher goods and services, salaries, and wages to support operational readiness and skill upgrades for the capital program.

The Authority is executing a decade-long transformation plan called Pearson LIFT (Long-term Investments in Facilities and Terminals), which was announced in 2023, to reinforce its status as Canada's global aviation hub. It involves infrastructure investments that will renew aged facilities, revitalize existing terminals, add new terminal space, and improve groundside access, which will increase Toronto Pearson International Airport's capacity planning for future growth. GTAA's corporate strategy centres on elevating passenger experience through seamless digital tools and better transit and curbside access, while driving operational excellence via modernization of airfield systems, digital processing, and capacity expansion.

Morningstar DBRS considers GTAA's liquidity to be robust, with $2.5 billion in liquidity available as of June 30, 2025. This comprises $1.4 billion in borrowing capacity under the Authority's $1.4 billion Operating Credit Facility (extended until May 31, 2028); $25 million in available capacity under its $175 million Letter of Credit Facility (extended until May 31, 2026); and unrestricted cash of $1.1 billion. Available liquidity is expected to remain at or above $2.0 billion in 2025-27. Additionally, GTAA implemented a number of financial risk resilience measures in 2023, including achieving and maintaining cash on hand equal to approximately 300 days of daily operating expenses, which will increase the Authority's ability to withstand disruptions to travel that would drive reduced cash flows. As of June 30, 2025, GTAA had 334 days of cash on hand and is aiming to keep it at or above the 300-day cash-on-hand target. There are no bonds that will mature until December 2027. As of June 30, 2025, no CP was outstanding as GTAA used $285.0 million in short-term investments to repay the outstanding CP in March 2025.

CREDIT RATING DRIVERS
A material and negative deviation from Morningstar DBRS' base-case scenario forecast could result in a negative credit rating action. Additionally, a material change in GTAA's internal guidelines on the CP program could have a negative impact on the CP credit rating. Morningstar DBRS does not expect to take a positive credit rating action over the medium term.

FINANCIAL OUTLOOK
At the end of 2024, total debt, as per Morningstar DBRS' calculation, was $7.1 billion, $85 million more than one year earlier. The DSCR, as per Morningstar DBRS' calculation, increased to 3.1x from 3.0x the previous year, and total debt per enplaned passenger decreased to $305 from $315, which is commensurate with the current credit ratings.

Morningstar DBRS' base-case scenario for 2024 expected that passenger traffic would be fully recovered to 2019 levels by the end of 2025. However, capacity constraints within the industry have contributed to slower recovery. Morningstar DBRS expects 2025 traffic to reach 95% of 2019 levels and expects 2026 traffic to reach 100%. Morningstar DBRS expects the DSCR to increase to 3.14x in 2025 and remain below 3.0x from 2026 to 2029 because of the increase in leverage needed to fund the capital programs (2.9x in 2026, 2.6x in 2027, 2.7x in 2028, and 2.6x in 2029). Morningstar DBRS also expects debt per enplaned passenger to decrease to $286 in 2025 as more passengers return and to then increase to $315 in 2026, $361 in 2027, and up to $420 in 2029 as a result of increased debt. Morningstar DBRS also considered a stress case where traffic recovery is delayed to 2027, in which case metrics are still commensurate with the current credit ratings.

CREDIT RATING RATIONALE
Comprehensive Business Risk Assessment (CBRA): AAL/AH
The credit ratings reflect the Authority's financial outlook, underpinned by strengths that include its (1) unregulated ability to set fees to recover costs, (2) virtual monopoly over airport services, (3) service area with strong economic fundamentals, and (4) status as Canada's primary international gateway. The challenges include (1) the inherent volatility in the air travel industry, (2) GTAA's high exposure to a single air carrier, and (3) the Authority's significant ground lease obligations.

Comprehensive Financial Risk Assessment (CFRA): AH/"A"
The DSCR for 2024, as calculated by Morningstar DBRS, increased to 3.1x from 3.0x the previous year, and total debt per enplaned passenger decreased to $305 from $315, which is commensurate with the current credit ratings.

Intrinsic Assessment (IA): AH
The IA is based on GTAA's CBRA and CFRA. Considering peer comparisons, among other factors, Morningstar DBRS places the IA in the middle of the IA range.

Additional Considerations: None
There were no additional considerations that had a positive or negative effect on GTAA's credit ratings.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) at https://dbrs.morningstar.com/research/454196.

Further details on the Issuer's Intrinsic Assessment can be found at https://dbrs.morningstar.com/research/460523.

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

Morningstar DBRS applied the following principal methodology:
-- Methodology for Rating Airports (May 22, 2025), https://dbrs.morningstar.com/research/454581

Morningstar DBRS credit ratings may use one or more sections of the Morningstar DBRS Global Corporate Criteria (February 3, 2025; https://dbrs.morningstar.com/research/447186), which covers, for example, topics such as holding companies and parent/subsidiary relationships, guarantees, recovery, and common adjustments to financial ratios.

The following methodology has also been applied:
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025), https://dbrs.morningstar.com/research/454196

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

A description of how Morningstar DBRS analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/431153.

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 under Related Documents or by contacting us at info-DBRS@morningstar.com.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS trends and credit ratings are under regular surveillance.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 600
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577