Fitch Affirms Columbus Regional Airport Auth's (OH) Rev Bonds at 'A+'; Outlook Stable

Fitch Ratings has affirmed the rating on approximately $73.6 million in outstanding Columbus Regional Airport Authority (CRAA), Ohio senior lien airport revenue bonds at 'A+'. The Rating Outlook is Stable.

The authority's rating reflects a relatively stable traffic profile that serves a medium-sized metropolitan area of Ohio, consisting of many corporate headquarters and universities. The authority maintains a broad mix of major carriers, with no one carrier accounting for more than 33% of enplanements, and a cost per enplanement (CPE) level comparable with its peers. The authority exhibits strong coverage and low leverage, even under a stressed enplanement scenario. However, the authority is currently limited to this category due to its size and traffic profile.

KEY RATING DRIVERS

Revenue Risk - Volume: Midrange

Diversified O&D Traffic Base with Some Volatility: Port Columbus International Airport's (Port Columbus) air trade service area supports a 99% origin and destination (O&D) oriented traffic base. The authority maintains a well-diversified mix of low cost and legacy carriers, led by Southwest Airlines with 33%, that served 3.1 million enplanements in 2013. The authority faces some measure of competitive risk.

Revenue Risk - Price: Stronger

Strong Cost Recovery Framework: Under the current hybrid use and lease agreement (through 2014), CRAA has strong provisions for cost recovery and prudent carrier revenue sharing arrangements that either maintain at least 2.0x debt service coverage or one year's worth of operating expenses. Given the proximity of several airports, Fitch recognizes that there may be some local competitive pressure on the authority's CPE, $8.88 in 2013, but the terms of the agreement are intended to maintain cost competitiveness.

Infrastructure Development and Renewal: Stronger

Manageable Capital Spending: CRAA's five-year capital improvement program (CIP) assumes a $15 million issuance of additional senior parity debt within the next year. The authority is currently utilizing a subordinated revolving credit facility to fund a portion of its short-term capital needs in addition to on-going federal grants and a high reliance on passenger facility charges (PFCs) to support the CIP.

Debt Structure: Stronger

Conservative Debt Structure: CRAA's senior lien debt is fixed-rate with level debt service of approximately $8.3 million through 2023, which subsequently declines through final maturity in 2027. Fitch notes that the authority's subordinated variable-rate bank loan exposes the authority to some refinance risk. At the current rating level, Fitch does not expect the subordinated obligations to represent a large part of the overall capital structure.

Low Leverage and Healthy Coverage: CRAA's robust liquidity of $97.9 million, or approximately 548 days cash on hand, supports extremely low levels of financial leverage of 1.7x net debt to cash flow available for debt service. Senior debt service coverage is expected to remain above 2x in the near term.

Peers: Amongst its peers within the 'A+' rating level, such as Milwaukee (WI) and San Antonio (TX), CRAA exhibits strong liquidity, lower leverage and stronger debt service coverage. However, CPE is slightly higher but within a reasonable range.

RATING SENSITIVITIES

Negative:

--Measurable contraction or elevated volatility in passenger traffic;

--Deterioration of the authority's non-aviation revenue that limit its ability to manage CPE levels;

--The dilution of debt service coverage for a sustained period below 2x.

Positive:

--The authority's size and traffic profile restrict the likelihood of a higher rating at this time.

SECURITY

The bonds are secured by the net revenues generated by the operations of Port Columbus and Bolton

Field.

CREDIT UPDATE

Enplanements have proven to be moderately volatile over the last five years, decreasing at a five-year compounded annual growth rate (CAGR) of 2.1%. Although enplanements dropped by 1.9% in fiscal year (FY) 2013, FY2014 has seen positive increases, with enplanements currently up 2.1% through five months. Allegiant, a new carrier serving CRAA, is offering new service to St. Petersburg, Punta Gorda and Myrtle Beach, and should incrementally add to enplanement growth as well. Additionally, Vacation Express began offering service to Cancun and Grand Bahama Island. The authority expects enplanements to grow at a steady pace of nearly 2% in each of the next five years.

The authority has seen operating revenue perform well despite the volatility in enplanements, increasing at a five-year CAGR of 1.14%. Operating revenue increased 4.9% in FY2013, slightly above the 4.5% increase realized in FY2012. Non-aviation revenue generates 64% of total revenue and is well-diversified. Operating expense has grown at a five-year CAGR of 3.55%, however management has efficiently controlled these costs through various initiatives. Such incentives include a fully propane-fueled bus fleet, which will decrease fuel costs in excess of $100,000 per year, as well as other energy efficient initiatives, which should reduce electricity consumption by 8.4% and generate natural gas savings of 4.8%.

Fitch's Base Case scenario, which assumes moderate enplanement growth and reasonable cost escalation, results in average total debt service coverage above 2x through FY2019. The Rating Case assumes a moderate near-term enplanement shock, consistent with recent stresses, and greater cost increases. This scenario results in average total debt service coverage just below 2x while CPE migrates north of $9. In both cases leverage migrates toward zero within five years.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Rating Criteria for Infrastructure and Project Finance' (July 11, 2012);

--'Rating Criteria for Airports' (Dec. 13, 2013).

Applicable Criteria and Related Research:

Rating Criteria for Infrastructure and Project Finance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=682867

Rating Criteria for Airports

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=725296

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=877756

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