Global Credit Research - 14 Jun 2016
New York, June 14, 2016 -- Summary Rating Rationale
Moody's Investors Service has affirmed the Aa3 rating on the Charlotte (City of) NC Airport Enterprise's outstanding airport revenue bonds. The outlook is stable.
The Aa3 rating is based on the airport's maintenance of extraordinary financial performance, stable and growing enplanement levels, and the strength of the local demand for air travel. The airport's financial performance, particularly its cost per enplanement and liquidity levels, offset the airport's primary credit risk of reductions to American Airlines Group Inc. (Ba3 stable) connecting operations. Based on the airport's financial position and cost structure as well as O&D demand, we believe Charlotte airport (CLT) could withstand a substantial loss of connecting traffic and remain on solid financial footing.
Rating Outlook
The stable outlook is based on our view that the economic strength of the service area economy will continue to drive strong O&D demand, providing ample cash flow to minimize the amount of debt required to fund the airport's expansion and renovation plans. We expect that the airport will retain its position in the American Airlines route network.
Factors that Could Lead to an Upgrade
Sustained and projected DSCR above 2.5 times
O&D enplanements above 8 million
Factors that Could Lead to a Downgrade
A sustained decrease in O&D enplanements
A sudden and severe reduction in connecting traffic by American Airlines
Cost overruns or delays on the airports capital program that increases leverage or negatively affects airport operations
Legal Security
The bonds are secured by a pledge of net revenues and unencumbered funds in the Renewal and Improvement Fund. Bondholders are protected by a rate covenant that rates remain sum sufficient for annual debt service requirements and 1.25 times including 25% from the rolling coverage account. Debt service reserve requirements are funded at the standard three-prong test.
Obligor Profile
CLT is classified as a large hub airport by the FAA. The airport has four runways, with simultaneous independent departures authorized on three of them, a terminal facility with 96 boarding gates spread over five concourse, and 26,700 public parking spaces. The airport also has a conrac, though revenues from the conrac are not pledged to general airport revenue bonds.
