Dallas-Fort Worth International Airport Revs Rated 'A-'.

NEW YORK--(BUSINESS WIRE)--Sept. 15, 1999--

Dallas-Fort Worth International Airport's (DFWIA) facility improvement corporation rental car facility charge revenues bonds $19,300,000 series 1999 (taxable) are rated 'A-' by Fitch IBCA.

The bonds are expected to be sold through negotiation via a syndicate lead by Dain Raisher during the week of Oct. 5. Also, Fitch IBCA affirms its rating of 'A-' on the corporation's outstanding $140,000,000 million of parity debt.

The bonds are being issued to finance additions and scope changes to the common rental car customer service building and the attached parking structure at DFWIA, modifications to the bus fleet including state-of-the-art global positioning system technology, and a visitor center, among other things. The project which will bring 10 rental car companies, both off-airport and on-airport, into a shared space which will be located on-airport and served by a common bus fleet. Further, this consolidated rental car facility will significantly improve operating efficiency for the car rental companies and help reduce automobile congestion around the terminal buildings while enhancing the overall customer experience.

Pursuant to the rental car facility agreements, each participating rental car company is required to charge and collect a daily facility charge from each customer entering into a rental car contract. The facility agreements have been executed with 10 rental car companies. The facility charge may not exceed $3.00 per transaction day. The companies will remit all facility charges collected no later than the 20th day of the month following collection to the trustee. Additionally, a comprehensive monitoring system will be in place to ensure proper compliance with the facility agreements. These bonds, with final maturity in 2024, are secured, excluding reserve funds, by the facility charge.

The airport market segment is integral to the rental car industry, accounting for between 67%-79% of the total U.S. rental car industry's revenues. Nine rental car companies currently serve DFWIA, with Hertz, Avis, National, and Budget operating on airport premises and accounting for approximately 88% of the airport's total market share. The remaining 12% of DFWIA's rental car market is derived from Alamo (4%), Dollar (3.2%), Thrifty (1.8%), Advantage (1.5%), and Enterprise (1.0%).

Since the majority (92%) of rental car customers at DFWIA are business travelers, demand for rental cars depends on the strength of the origination and destination (O&D) market and the Dallas-Fort Worth service area. In 1998, DFWIA served about 10 million O&D enplanements, up from 7.6 million in 1990, a 3.4% average annual growth rate. Fitch IBCA rates DFWIA's general airport revenue bonds 'A+'. The airport serves a 12-county region with a combined 1997 population of 4.7 million--approximately 24% of Texas's total population. Employment in the service area continues to grow, as the healthy economy diversifies further with the addition of more high technology companies and telecommunications manufacturers. Also, Dallas is the one of the largest convention markets in the U.S.

The airport's feasibility consultant base-case projections indicate solid financial results throughout the term of the bonds. Facility charges will be collected according to a residual methodology. Under this rate-setting methodology, total facility charge collections will provide for 1.25 times (x) annual debt service, fund a debt service reserve fund equal to maximum annual debt service, and an additional surplus reserve account equal to 10% of maximum annual debt service.

Base-case projections indicate that the required facility charge will be $2.56 in 2001, consistently decreasing to $1.86 by 2009. The projected charge is below the $3.00 cap, low enough to allow for a decrease in car rental activity. Base-case projections include realistic assumptions, as compared to actual historical activity. O&D enplanements are projected to increase 3.2% annually through 2009, compared with historical annual increases of 3.4% since 1990. Also, annual transaction days are projected to increase 3.9% annually through 2009, compared with an annual increase of 6.9% over the past six years.

To quantify the sensitivity of O&D enplanements on financial projections various stress test scenarios were conducted. The sensitivity analyses indicate that the facility charge would increase to $2.59 or $2.81, if rental car demand either slowed to only 1.6% growth during the forecast period or if there was no growth during this period. Therefore, rental car demand could remain static and experience no growth through 2009 and still debt service coverage would remain adequate. Furthermore, the sizable reserves are sufficient to cover any potential rental car company nonpayment for a one- or two-month period.

Offsetting credit factors include the limited nature of the revenue stream (facility charge), as well as its vulnerability to changes in passengers' transportation preferences, technology enhancements and/or changes in current business practices (i.e. less traveling), and rental car industry modifications over the term of the bonds. Furthermore, the facility charge is capped at $3.00 per transaction day; however, it should be noted that the Facility Improvement Corp. board has the ability to increase the facility charge beyond its current cap. Also, limited competition exists with respect to alternative transportation modes (i.e. taxis, among other things) and other airports (Love Field). Rental cars are expected to continue to be the preferred choice for business travelers. Also, Love Field is not projected to materially impact O&D traffic levels at DFWIA due to Love Field's airfield, terminal, and infrastructure capacity constraints.