Fitch Ratings affirms its underlying 'A+' rating on the City of Boise City, Idaho's $44.95 million outstanding series 2000 senior lien/PFC-supported airport revenue certificates of participation (COPs), due 2030, and $3.88 million outstanding series 2004-1 airport revenue refunding bonds, due 2011 (Parking Facilities Project). The Rating Outlook on both series of bonds remains Stable. The senior lien is closed and expectations are that any future debt will be issued on parity with the series 2004-1 bonds.
The underlying 'A+' rating reflects the airport's lack of competition; historically stable enplanement base, high percentage of origination and destination (O&D) traffic, and diversified airline market share; stable financial performance; comparatively low cost structure; and historically strong debt service coverage.
The Stable Outlook reflects the airport's modest debt burden in the near to medium term; strengthening liquidity profile; and access to diverse revenue sources which serve to mitigate the impact of expected near-term enplanement declines. These factors support the airport's ability to maintain debt service coverage levels that are at or above historical levels despite the current economic environment.
Central to the 'A+' rating is the airport's lack of competition, as it is the only airport within approximately 400 miles providing scheduled national service. Historically, the airport has experienced healthy enplanement growth. Since 2004, enplanements have expanded at a compound annual growth rate (CAGR) of 2.4% to 1.58 million in calendar year (CY) 2008 from 1.44 million in CY2004. However, due to pressure in the current economic environment, the airport has seen enplanements fall off considerably in CY2008, decreasing every month since May 2008 at an average rate of 11% year-on-year. January and February 2009 registered 18.2% and 16.8% year-on-year declines, respectively, and management expects a 15% decline for the year in 2009. The airport's airline market share diversity is adequate, with two dominant airlines, Southwest Airlines (29%) and Horizon Air (26%), comprising 54% of the market share in CY2008. O&D passengers consistently account for 90%-95% of the airport's traffic, with remaining travelers representing regional connections to small neighboring communities. Therefore, Boise airport's position as the major airport within the state and its high percentage of O&D passengers serve to mitigate the risk presented by the small scale of operations.
Further supporting the rating is the airport's strong financial performance, low cost structure, and strong debt service coverage. The airport has consistently generated stable, positive operating income before depreciation, which, when combined with grants, passenger facility charge (PFC), and customer facility charge (CFC) revenues, results in stable to growing net income. In the past, airport management has generated solid operating margins without significantly increasing rates and charges to the airlines, with the cost per enplaned passenger (CPE) held steady in the $3.40 range. CPE increased to $3.58 in 2008, and is budgeted to increase further in 2009 and 2010. Airport management utilizes a residual methodology and is projecting that with a 7% drop in enplanements through 2011, the CPE will rise to the $5 range. However, even with this increase, the CPE level remains low compared to the airport's peers. The risk of increasing leverage over time is limited by a city statute requiring approval by a super-majority of Boise citizens for any new debt issuance. This serves to mitigate the risk of bondholder dilution as the airport pursues a demand-driven capital plan largely funded by grants, PFCs, and internally generated liquidity. Debt service is strong for a residual airport, with senior lien series 2000 coverage ranging from 5.2 times (x) to 12.3x based on available funds (net revenues plus PFCs) in 2004 to 2008. The junior 2004 series has also had consistently high coverage at 4.9x to 7.5x based on remaining available funds and CFC revenues. Furthermore, under various stress scenarios contemplating reduced enplanement levels and corresponding decreases to net revenues, the availability of diverse revenue sources allows the airport to maintain coverage consistent with or above historic levels. Following the maturity of the series 2004 bonds in 2011, the airport's annual debt service requirements decrease by 28%.
Credit concerns include the impact of enplanement and revenue contraction due to the broader economic slowdown, and the risks present at a small airport should an airline contract service or otherwise reduce capacity. However, the airport's strong liquidity position (increasing cash and investment balances in recent years with $30 million on hand as of Sept. 30, 2008), sizable non-airline rental revenue streams, and access to grants, PFC, and CFC revenue streams all serve to relieve some pressure due to reduced enplanement levels. Similarly, the airport's unique geographic position serves to provide a base level for enplanements, and mitigate the risk of carriers pulling service from the region entirely.
Boise Airport's facilities include 7,000 acres, three runways, terminal facilities opened in 2003, 2,831 parking spaces, and numerous properties leased to third parties.
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Jesse
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or
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Email: cindy.stoller@fitchratings.com
