KBRA Assigns A+ Rating to Allegheny County Airport Authority, PA (Pittsburgh International Airport) Airport Revenue Bonds; Outlook is Stable
21 Sep 2023 | New York
KBRA assigns an A+ rating with a Stable Outlook to the Allegheny County Airport Authority's (ACAA's) Airport Revenue Bonds, Series 2023A (AMT), Series 2023B (Non-AMT) and Series 2023C (Federally Taxable). Concurrently, KBRA affirms the long-term rating of A+ with a Stable Outlook on ACAA's outstanding Airport Revenue Bonds. The rating assignment reflects the steady post-pandemic recovery in passenger traffic, revenue and destinations served at Pittsburgh International Airport (“PIT”, or “the Airport”). Further underpinning the rating is ACAA’s broad mix of aeronautical, non-aeronautical and non-operating revenues, which contributes to stable operating performance and airline affordability, facilitating efforts to attract new airlines and routes to PIT. The assignment further considers projected debt and leverage metrics, which are expected to be stressed throughout the forecast period, as well as the potential volatility of certain revenues that may be deemed “Other Pledged Revenues under the Master Trust Indenture (“MTI”).
Key Credit Considerations
The rating was assigned because of the following key credit considerations:
Credit Positives
- Proactive leadership team focused on maintaining competitive airline costs through revenue diversification, innovative pricing structures, operating efficiencies and expense controls.
- Absence of airline concentration, unique non-aviation revenue sources which can be applied on a discretionary basis, and the origin and destination nature of Airport activity aid in stability.
- The diversified regional economy benefits from a young, well-educated workforce, low unemployment, and growth in strategic employment sectors. A lack of population growth somewhat offsets these positive demographics.
- The risk of construction cost escalation or project delays that entail significant cost overruns has been largely mitigated.
Credit Challenges
- Projected leverage is high and debt metrics are expected to be stressed throughout the forecast period.
- Certain revenues that may be deemed “Other Pledged Revenues” under the Master Trust Indenture are volatile.
Rating Sensitivities
For Upgrade
- Recognition of anticipated operating cost savings and maintenance of manageable airline costs.
- Full recovery in enplanements and subsequent sustained growth that results in sound coverage margins (taking into consideration the residual nature of rates), and moderate airline costs.
For Downgrade
- A lack of attainment of projected operating cost reductions, airline costs, or enplanement levels upon completion and operation of the TMP and ARP projects.
- A pause or reversal in enplanement recovery, triggering significant increases in airline costs.
To access rating and relevant documents, click here.