Fitch Rates $408.5M Indianapolis' Airport Revenue Bonds 'A+'; Outlook Stable.

SAN FRANCISCO -- Fitch Ratings assigns an 'A+' rating to the Indianapolis Local Public Improvement Bond Bank's (bond bank) approximately $365 million series 2006F bonds and approximately $43.5 million series 2006G bonds. The series 2006 bonds are scheduled for a negotiated sale during the week of June 5 through a syndicate led by City Securities. The bonds are ultimately secured by a pledge of net revenues of the Indianapolis Airport (the airport) and are expected to be guaranteed by a bond insurer whose financial strength is rated 'AAA' by Fitch. Bond proceeds will finance various elements of the capital program at the airport. Fitch also affirms the $579 million in outstanding airport revenue bonds. The Rating Outlook is Stable.

The 'A+' rating for the authority reflects the broad and expanding economic base of the Indianapolis region and the resultant demand for air service; the airport's demonstrated resiliency to recent changes in the provision of air service in the local market; a well-diversified mix of carriers serving the airport; and the airport's competitive cost position. Credit concerns include the cost and construction risk represented by the airport's large capital improvement program and the financial difficulties of the domestic airline industry, particularly those of Northwest Airlines, the airport's largest carrier, which is under bankruptcy protection. The Stable Rating Outlook is based on the recent growth in enplanement activity at the airport, the response to Northwest's recent increase in service, and the likelihood that this demand would result in other carriers increasing service should Northwest be forced to reduce its operations at the airport.

The airport is the primary commercial facility serving the Indianapolis metropolitan area. The region's expanding economy, which has grown at rates at or above the state and national averages for the past 10 years, generates strong demand for air service. Enplanements reached a record 4.3 million in 2005, a 5.9% increase from 2004, to rank the airport as the nation's 45th largest in terms of enplanements by Airports Council International- North America (ACI) in 2005. Passenger traffic is down 10% for the first three months of 2006 compared to the same period in 2005.

The authority's residual use and lease agreement results in consistently sound financial operations. The airport's ability to generate substantial non-airline revenue, which represented nearly 60% of total operating revenue in fiscal 2005, sustains the airport's reasonable cost per enplaned passenger (CPE) of $6.40 for the year. The significant presence of FedEx, which operates its second-largest sorting facility in the world at the airport, has announced a major expansion of more than 600,000 square feet to its existing facility. Moreover, FedEx contributes to the airport's competitive cost environment, as airfield expenses are distributed across a broader customer base than airports with lesser amounts of cargo activity. The airport's fiscal 2005 net revenues provided well over 2 times (x) coverage of senior debt service for the year.

The airport is in the midst of $1.7 billion capital improvement program (CIP) for the years 2001-2012, the centerpiece of which is the development of a "New Indianapolis Airport" including a new mid-field terminal scheduled to open in late 2008. The authority plans to finance the CIP through a mix of general airport revenue bonds (50.8%), passenger facility charge (PFC)-backed debt (11.0%), airport funds (15.7%), federal grants (13.8%), and PFCs on a current basis (4.9%) and customer facility charge (CFC) (3.8%). The program is expected to result in the CPE rising to a slightly above average $10.28 in 2010 before declining to $9.97 in 2012. Reflecting the residual nature of the use and lease agreement, debt service coverage is projected to exceed 1.86x through 2012.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.