Alaska, Alaska International Airports Sys Revs Rated `A+'.

NEW YORK--(BUSINESS WIRE)--Sept. 8, 1999--

State of Alaska's $25,000,000 series 1999C (AMT) bonds are rated `A+' by Fitch IBCA. Revenues of the Alaska International Airports System (Anchorage International Airport-AIA-and Fairbanks International Airport-FIA-are the sole security for the series 1999C bonds. The bonds are expected to be sold through negotiation via a syndicate led by Merrill Lynch during the week of Oct. 4. Also, the airports system has approximately $210 million outstanding in parity debt, which Fitch IBCA also rates `A+'.

The `A+' rating for the airport system revenue bonds reflects the essentiality of the airport system, its strategic location for international cargo hubbing, and its diversified revenue base. Alaska's location, size, lack of roads, and weather make air transport vital. Most commodities imported into the region or exported out utilize air service. In addition, the state is located on the great circle route--equidistant to Asia, Europe, North America, and the Pacific. International trade agreements have made Alaska's strategic location even more desirable in terms of international cargo hubbing. The cargo carriers are able to transfer cargo with foreign carriers; thus, maximizing their payloads. FedEx, UPS, United, Polar, and Northwest all have transloading hubs at AIA. Another strength of the credit is the multitude of significant revenue streams that support the airport system. In addition to a solid enplanement base that operates under a `cost-center residual' agreement, the cargo carriers pay a fixed gross weight fee and a two-cent fuel flowage fee, and the airport also generates significant non-airline related revenue from concessions and vehicle parking.

Additionally, both AIA and FIA have experienced strong overall passenger enplanement growth from fiscal year 1990- 1998. However, during the past two fiscal years passenger enplanments have slightly decreased from their all-time high in 1997. Between fiscal years 1990-1999 cargo operations also expanded. Over the past five years approximately $160 million of private third-party development occurred at the airport system and the cargo industry indicates that this trend will continue. Experienced consistent management has proactively focused on airport needs and competitive positioning. The current debt issuance will fund several demand-driven airfield projects.

Offsetting the noted strengths are the risks associated with a large construction project in progress (Gateway Alaska), the volatility in the oil industry, the effects of the Asian crisis on international cargo, and the residual airline operating agreements (expiring in July 2000). To date, the airport projects are 8.4% complete, the tenants have been relocated, phase 1 of the road construction was successfully bid, and approximately 60% of the design work for concourse C is complete, among other things. Fitch IBCA will continue closely monitoring the construction schedules and budgets for ongoing projects at AIA. Uncertainties relating to the oil industry may cause fluctuations in the airport system's operations, given the oil sector's importance to the state. Furthermore, the economic crisis in Asia and resulting economic vulnerability in other parts of the world have the potential to negatively affect cargo traffic at the airport system. Also, rates and charges at the airport are projected to increase moderately following the issuance of the series 1999 bonds. However, the increased fees are not expected to affect the competitive cost structure at the airport system. In addition, the airport system's residual airline operating agreement, currently being negotiated since it expires in July 2000, limits the system's upside revenue potential. However, the airport system's plentiful reserves sufficiently augment coverage--3.65 times including interest during fiscal 1998.