October 12, 2011
Summary:
Charlotte/Douglas International
Airport, North Carolina; Airport
Primary Credit Analyst:
Todd R Spence, Dallas (1) 214-871-1424; todd_spence@standardandpoors.com
Secondary Contact:
Anita Pancholy, Dallas (214) 871-1402; anita_pancholy@standardandpoors.com
Table Of Contents
Rationale
Outlook
Related Criteria And Research
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Summary:
Charlotte/Douglas International Airport, North
Carolina; Airport
Credit Profile
US$80.675 mil arpt rev bnds (Charlotte/Douglas Intl Arpt) (Non-amt) ser 2011A due 07/01/2040
Long Term Rating
A+/Stable
New
US$33.995 mil arpt rev bnds (Charlotte/Douglas Intl Arpt) (Amt) ser 2011B due 07/01/2040
Long Term Rating
A+/Stable
New
A+(SPUR)/Stable
Affirmed
Charlotte, North Carolina
Charlotte/Douglas Intl Arpt, North Carolina
Charlotte (Charlotte/Douglas Intl Arpt) various series
Unenhanced Rating
Rationale
Standard & Poor's Ratings Services assigned its 'A+' long-term rating to Charlotte, North Carolina's $80.7 million
series 2011A airport revenue bonds and $40 million series 2011B airport revenue bonds issued on behalf of
Charlotte/Douglas International Airport (CLT). At the same time, Standard & Poor's affirmed its 'A+' long-term
and underlying rating (SPUR) on the city's outstanding revenue bonds, issued for CLT. The outlook on all ratings is
stable.
The rating reflects our assessment of CLT's:
•
•
•
•
Consistently strong liquidity position and very low airline cost structure;
US Airways Inc.'s (B-/Stable) continued commitment to the airport;
Generally favorable demand characteristics; and
Strong financial margins.
The rating further reflects what we view as CLT's:
• Generally positive passenger trends;
• Strong financial metrics; and
• Very strong unrestricted cash position.
Offsetting credit weaknesses, in our opinion, include the airport's:
• Very high air carrier concentration (US Airways accounts for 88.5% of passengers boarding flights); and
• High exposure to connecting passengers (74%).
Net revenues for the airport's included cost centers secure the bonds. Included cost centers refer to the terminal
complex and public aircraft facilities, while excluded cost centers include the cargo areas, aircraft maintenance
center, catering areas, and the fixed-base operator area. A debt service reserve (DSR) fund funded to the IRS
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Summary: Charlotte/Douglas International Airport, North Carolina; Airport
maximum also secures the bonds. CLT has met some of its DSR requirements with surety bonds provided by MBIA
Insurance Corp. (B/Negative) and Ambac Assurance Corp. (not rated). Although Charlotte is not planning to replace
any of these surety bonds, we don't consider this a credit concern. The combined coverage of the MBIA and Ambac
surety bonds is approximately $13 million and $11 million, respectively, while the airport's unrestricted cash
balance as of June 30, 2011, totaled $395 million.
CLT is an important connecting hub within US Airways' system and serves what we view as a strong, diverse, and
expanding service-area economy, including 13 counties anchored by the City of Charlotte (AAA/Stable). In our
opinion, these have contributed to the airport's favorable traffic trends. The Charlotte metropolitan area's
population averaged a 2.17% average annual growth rate from 2007-2011. The feasibility consultant projects
population growth to continue at an average annual growth rate of 1.78% from 2011-2017. The city owns and
operates CLT, which is located seven miles west of Charlotte's central business district.
From fiscals 2007-2011, the airport's total enplanements increased at a average annual growth rate (AAGR) of
5.8%. During fiscal 2011 (ending June 30), it enplaned 19.7 million passengers, up 11.2% from fiscal 2010. The
increase can be split into connecting and origin and destination (O&D) with a 12.9% increase in connecting
passengers and a 6.4% increase in O&D passengers. This was the result of US Airways increasing its hubbing
operations; while local demand was remained relatively strong after an 8.4% decrease in 2009 followed by a 4.0%
increase in 2010 and 6.4% increase in 2011. From fiscals 2007-2011, the AAGR for O&D passengers was 1.1%,
and connecting traffic was 7.7% AAGR. During this period, O&D passengers' share of total passengers ranged
from 25%-30% of total enplanements. For fiscal 2011, CLT enplaned almost 5.0 million O&D passenger (25.4%
of total enplanements).
Management has historically maintained what we consider strong financial metrics, which includes strong debt
service coverage (DSC), a low airline-cost structure, good revenue diversity, and a low debt burden with very strong
liquidity. More specifically, DSC, as calculated by Standard & Poor's, has exceeded 2.0x from fiscals 2006-2010.
Standard & Poor's DSC calculation includes committed passenger facility charges (PFCs) in the numerator and
excludes transfers from the previous year. Coverage in 2011, as calculated by Standard & Poor's, is 2.32x -- based
on unaudited data. Coverage during the forecast period from 2012-2017 as calculated by Standard & Poor's ranges
from 1.75x to 2.32x. Indenture coverage during the forecast ranges from 2.96 to 4.24x. At fiscal year-end 2011
(June 30), CLT's cost per enplanement is what we view as a low $1.57, down from an already low $2.09 in fiscal
2005. Including airline credits, this drops to 67 cents for fiscal 2011 and $1.48 for fiscal 2005. Cost per
enplanement is a total measure of how much it costs airlines operating out of an airport per enplaned passenger.
Cost per enplanement to is forecast to remain low from 2012-2017, remaining under $1.00 each year including
airline credits. Management has done a good job, in our opinion, of limiting CLT's reliance on air carriers. As a
result, its revenue diversity is what we consider good, with passenger airline revenues representing about 25% of
total pledged operating revenue in fiscal 2011. This is down from 32.4% in fiscal 2005. We believe the airport's
debt load is very manageable at $35 per enplaned passenger. Based solely on O&D, debt per enplanement increases
to $139.
Management has maintained what we consider a very strong unrestricted cash position historically, providing CLT
with an added financial cushion should activity levels unexpectedly drop. For fiscal year-end 2011, the airport's
unrestricted cash balance totaled almost $395 million or 2,348 days worth of cash on hand to cover operating
expenses based on budgeted 2012 expenses. From fiscals 2005-2010, CLT's fiscal year-end unrestricted cash
balances provided about 1,800-2,600 days' cash on hand. Standard & Poor's also considers the airport's exposure
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Summary: Charlotte/Douglas International Airport, North Carolina; Airport
to variable-rate debt manageable given the airport's strong liquidity position. As of June 30, 2011, its audited
unrestricted cash balance totaled approximately $395 million, compared with its unhedged variable-rate debt of
$124.9 million or 18% of the approximately $693 million of general airport revenue bonds (GARBs) outstanding
(pro forma including 2011A, B and C). CLT has no swaps outstanding.
CLT has what we consider a very high air carrier concentration, with US Airways and its regional affiliates in fiscal
2011 accounting for 89.8% of total enplanements and 59.7% of O&D enplaned passengers. Enplanements
represent the number of passengers who board an aircraft at CLT. O&D enplaned passengers represent the number
of passengers who ultimately start or end their trips at the airport. Connecting enplanements represent the number
of passengers who board an aircraft passing through CLT on their way to their ultimate destination.
In fiscal 2010, US Airways, and its affiliates, accounted for almost 25% of the airport's operating revenues. CLT
also has a high exposure to connecting traffic due its role as an important connecting hub within US Airways'
system. For fiscal 2011, approximately 75% of the airport's total enplanements were connecting passengers, while
only 25% were O&D passengers.
We expect CLT's debt burden and airline cost structure to potentially increase as a result of its $475 million capital
improvement program (CIP), which includes projects intended to preserve, enhance, or expand safety, security, and
capacity. All the projects are discretionary and will be undertaken when financially feasible and demand is in place.
Many of the projects in the CIP will be financed with additional bonds.
Outlook
The stable outlook reflects our view that CLT's financial margins and liquidity position will remain strong, despite
potential additional borrowing plans. We do not expect to lower the rating during our two-year outlook horizon
unless US Airways decides to eliminate most of its connecting service at the airport. Activity levels above the forecast
that lead to higher-than-forecast coverage as calculated by S&P and continued high unrestricted cash position could
prompt us to raise the rating.
Related Criteria And Research
USPF Criteria: Airport Revenue Bonds, June 13, 2007
Ratings Detail (As Of October 12, 2011)
Charlotte, North Carolina
Charlotte/Douglas Intl Arpt, North Carolina
Charlotte (Charlotte/Douglas International Airport)
Long Term Rating
A+/Stable
Affirmed
Charlotte (Charlotte/Douglas International Airport) (ASSURED GTY) (MBIA)
Unenhanced Rating
A+(SPUR)/Stable
Affirmed
A+(SPUR)/Stable
Affirmed
Charlotte (Charlotte/Douglas Intl Arpt) arpt
Unenhanced Rating
Many issues are enhanced by bond insurance.
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Summary: Charlotte/Douglas International Airport, North Carolina; Airport
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