The Dublin Airport Authority, which replaced Aer Rianta last month, could be in danger of losing its top credit rating because of high debt levels in future.
Under the State Airports Act 2004, the debts of Cork and Shannon airports are due to pass to Dublin Airport following approvals from the ministers for finance and transport.
A report commissioned by the authority suggests that gearing at the Dublin Airport Authority could rise from 48 per cent to 60 per cent as a result. Gearing refers to the ratio between debt and equity in a business.
The report by London-based consultancy National Economic Research Associates (NERA), has been passed to aviation regulator, Mr Bill Prasifka. It warns that these levels of gearing could cause the authority to lose its current A credit rating. The report warns the authority could lose this rating, from agency Standard & Poors, despite being a State-owned company. It says the authority might up with a BBB+ rating instead.
"The evidence suggests that, at a 60 per cent gearing level, the Dublin Airport Authority could find it more difficult to retain a single A credit rating, even though it is State-owned."
The report has been submitted to Mr Prasifka as part of a consultation process on the future regulatory regime needed for the three airports.
"The residual returns to equity holders will become more volatile at higher levels of gearing, leading also to an increase in Dublin Airport Authority's cost of equity," it states.
A report by the Dublin Airport Authority itself has also been passed to Mr Prasifka. This says that the Dublin Airport Authority is currently repaying a €250 million eurobond but, once it matures, the authority may need to re-finance, probably at the end of 2010.
The report by the authority acknowledges there is major congestion at the airport and measures are needed to alleviate the pressure.
However, it claims service quality has been addressed in recent times. It mentions several measures including:
It says the airport is also now benchmarking itself against major European and world airports.
The report from the authority says a lack of investment at the airport could worsen congestion and delays and lower service levels. "There may also be negative implications for the Irish economy, particularly in relation to trade, tourism, inward investment and employment," it warns.
