Fitch Rates Albany County, NY Airport Revs 'A-'; Stable Outlook.

Business Editors

NEW YORK--(BUSINESS WIRE)--May 9, 2003

Fitch Ratings assigns an 'A-' rating and a Stable Rating Outlook to Albany County Airport Authority, NY's $8,650,000 airport revenue bonds, series 2003A (non-AMT) scheduled for competitive sale on May 22, 2003. Bond proceeds will finance various runway improvements and will be secured by a pledge of the net revenues of the authority. The series 2003A bonds are issued on parity with the authority's $129 million outstanding airport revenue bonds, the ratings for which Fitch affirms at 'A-'.

Credit strengths include Albany County Airport's (the airport) strong financial margins and well balanced mix of air carriers, most notably Southwest Airlines. Credit concerns center on the national downturn in demand for air travel and on the timing of an eventual recovery. The Rating Outlook for the bonds is stable based on the economic strength of the New York state capital region and on the airport's role as the primary airport in that area.

Annual enplanements declined 3% at the airport in 2002, though this downturn was significantly less than the national average of 11%. The airport recorded 1.48 million enplanements in 2002, which exceeded fiscal year pre-Sept. 11 FY 2000 enplanements of 1.45 million. Additionally, 2002 enplanements were only 1.5% less than forecasted in the authority's 2002 budget. The Authority is forecasting enplanements to grow 1.6% in 2003 to 1.5 million.

The strength of the local market encouraged Southwest Airlines to add capacity, increasing its enplaned passenger base 7% to 340,975 passengers in 2002. Southwest represented 23% of the airport's enplaned passengers in 2002, followed by US Airways with 22%, Delta Air Lines with 13%, Continental and Continental Connection with 11%, Northwest Airlines with 8%, and American Airlines and United Airlines each with 5%. Furthermore, the airport experienced an increase in commuter airlines partnered with mainline carriers. Most prominent in this trend is Continental Connection (operated by CommutAir), which nearly doubled its operations and increased its passenger count to 71,212 in 2002 from 36,442 enplanements in 2001. The airport faces minimal competition for local passengers as the closest competing facilities are between 100-200 miles away and do not have the depth of service provided at the airport.

During fiscal year 2002 (Dec. 31 year-end), the airport's operating revenues increased 4.8%, to $29.1 million from $27.8 million in 2001, while operating expenses grew 3.5% to $19.4 million from $18.8 million. Rising costs were primarily attributed to an increase in law enforcement personnel to meet new federal security requirements and increased insurance premiums for war risk coverage. Non-airline revenues represented 53% of total operating revenue for the year, while debt service equaled a low 22% of total operating revenue, both figures bettering industry averages.

Net revenues provided 1.40 times (x) debt service coverage in FY 2002, well above the airport's 1.25x rate covenant. Due to the decline in passenger volume and increased operating expenses, the airport's cost per enplanement (CPE) rose to $7.49 during fiscal 2002, a level Fitch considers high for a small hub airport. In response management has taken efforts to cut costs by instituting a hiring freeze and scaling back the scope of capital projects. As a result of these efforts, the Authority expects that the CPE will stabilize near $7.00 through 2005 and that debt service coverage will remain in the 1.6x range.

The airport is in the midst of a five-year (2000-2004) $258 million capital improvement program (CIP). Through Dec. 31, 2002 the Authority has expended $45 million financed by $17 million of bonds, $10 million of Federal and State grants, and $18 million of capital interest and operating funds. The CIP is highly modular and the timing of certain project is dependent on the authority's ability to secure state or federal funds. The authority plans to finance the remaining projects through internal resources or state or federal funds, limiting its need for external borrowing during this period.

The airport is located seven miles northwest of the central business district of Albany, NY and serves the population in eastern New York, western Massachusetts and southern Vermont. In total, the airport's primary service area has approximately 1.3 million residents, with an additional 1.7 million residents in the secondary air-trade area.