DUBLIN AIRPORT Authority (DAA) yesterday had its credit rating downgraded by Standard & Poor’s (S&P), reflecting a recent decline in passenger traffic and uncertainty over the outcome of a regulatory review of passenger charges.
S&P revised its outlook for DAA to negative from stable. Its long-term corporate credit rating was reduced from A to A-. DAA’s short-term credit rating was left unchanged at A-1. “There are minimal prospects for an upgrade in the current economic environment,” S&P said yesterday.
“The downgrade reflects our view that DAA’s financial profile will weaken in 2009 significantly more than previously expected,” SP analyst James Hoskins said in a note yesterday.
DAA’s obligations comprise two large bond issues. One is a €250 million bond that is due to be repaid in 2011. It carries a coupon of 6.15 per cent. The other is for €600 million and is due to be repaid in 2018. The interest rate on this bond is 6.5872 per cent.
Mr Hoskins said the “deteriorating” Irish economy would result in a “significant decrease” in passenger traffic in 2009 and “reduced commercial revenues” at the company’s airports.
It is understood that passenger traffic has declined by 7 to 8 per cent in the first couple of months of this year.
“This decrease could be accentuated by the Government’s planned implementation of a €10 per passenger [air travel] tax in April for the majority of DAA traffic,” S&P noted.
SP said DAA had “limited financial flexibility” to defer capital expenditure this year. DAA is in the middle of a €2 billion expansion of its facilities at Dublin airport. Mr Hoskins said he expected DAA’s financial profit to “start to improve” in 2010 despite reduced traffic levels, depending on the outcome of the Commission for Aviation Regulation’s determination on passenger charges from next year onwards.
“In addition, we note that DAA’s management is identifying operation cost savings,” S&P said, adding that the airport manager could reduce its capital expenditure spend next year and focus only on maintenance spending.
