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Fitch Rates San Francisco Int’l Airport (CA) Revs ‘A+’; Outlook Stable

Fitch Ratings assigns an ‘A+’ rating to approximately $481 million Airport Commission, City and County of San Francisco, San Francisco International Airport (SFO, or the airport), second series revenue bonds series 2014 A and B. In addition, Fitch affirms the ‘A+’ rating on the outstanding $4.2 billion second series revenue bonds. The Rating Outlook is Stable.

The rating reflects SFO’s strong operational and financial performance within the healthy, yet competitive air trade market in the San Francisco Bay Area. The airport’s fully residual airline agreement and proven management team provide a solid framework for stable and  competitive results, however the elevated leverage profile and  additional borrowing needs create pressures on the rating.

KEY RATING DRIVERS

Revenue Risk-Volume: Stronger

STRONG OPERATING PROFILE AND POSITIVE TRAFFIC TRENDS: SFO serves as a major international gateway airport with a strong market share of passenger traffic within the San Francisco bay region (71% in fiscal year [FY] 2014). The airport has a well-balanced traffic profile, with 78% origination & destination (O&D) traffic in 2014, the remainder being a mix of domestic and international connecting traffic. United Airlines  Inc. (United; ‘B’/Outlook Positive) maintains a sizable presence at SFO, with a 46% share of the passenger market. United’s share has fallen in recent years despite its increased seat capacity as growth has been driven by the increasing presence of low-cost carriers (24% in FY2014) and service expansion by foreign-flag airlines.

Revenue Risk-Price: Stronger

FAVORABLE RATE SETTING FRAMEWORK: The current airline use agreement (AUL), in place through 2021, is fully residual and provides for strong cost recovery with respect to all operating and debt service requirements. Airline charges were $14.88 per enplanement in FY2013 and have been relatively stable in recent years, although they are expected to rise in the medium term due to additional projected costs associated with the airport’s capital improvement program (CIP).

Read more: Business Wire (press release) Fitch Rates San Francisco Int’l Airport (CA) RevsA+‘; Outlook Stable