Fitch Rates Metro Washington Airports Auth, D.C. $111.5MM Bonds `AA-'.

NEW YORK -- Fitch Ratings assigns an 'AA-' underlying rating to $111.5 million of Metropolitan Washington Airports Authority (MWAA) airport system revenue refunding bonds, series 2004C-2 alternative minimum tax (AMT).

The Rating Outlook is Stable. The series 2004C-2 bonds priced on July 8, 2004 through negotiation lead by Lehman Brothers. The series 2004C-2 bonds rank on parity with approximately $2.5 billion in outstanding airport system revenue bonds, which are also affirmed at 'AA-'. Net revenues generated from Dulles International Airport (IAD) and Washington Reagan National Airport (DCA) secure the bonds.

Proceeds of the series 2004C-2 bonds will be used together with other funds of MWAA to refund outstanding unhedged series 1994A bonds and to pay related issuance costs.

MWAA's 'AA-' rating reflects the competitive position and complementary nature of IAD and DCA, conservative forecasting assumptions with respect to both passenger levels and revenues, and the closely monitored capital improvement program ($3.4 billion).

The rating also reflects the bankruptcy and postbankruptcy status of UAL Corp., parent of United Airlines, and US Airways, both of which have substantial presence at IAD (39%) and DCA (36%), respectively. Both airlines appear committed to maintaining sizable operations within the D.C. area, and remain current on all payments to the authority. More recently, United and MWAA have agreed to terms that will cure the airline's default on prepetition bankruptcy debt, and United has affirmed its use and lease agreement with the authority.

Despite these positive developments, Fitch believes that risks do still exist as UAL completes its Chapter 11 reorganization and US Airways seeks to further reduce its well above industry average cost structure. The cessation of service by either airline would cause a temporary gap in service to both airports. However, the strong origination and destination (O&D) nature of the traffic levels at both IAD (69%) and DCA (92%) and the fairly competitive cost and debt profile of both facilities, provide clear incentive for new air carriers to enter the market.

MWAA has an experienced management team that oversees a large demand-driven capital program and consistently records healthy financial results. Net revenues of approximately $200 million covered debt carrying charges by a healthy 1.41 times (x) during fiscal 2003, providing strong cushion for bondholders. Additionally, the management team maintains strong oversight on accounts receivable from both bankrupt and nonbankrupt airlines serving IAD and DCA. As of Dec. 31, 2003, MWAA maintained healthy liquidity reserves of $165 million, excluding approximately $144 million of debt service reserve funds.

Major offsetting credit risks include MWAA's increased debt burden, as it expects to sell roughly $867 million in additional bonds between 2005 and 2011 and rising cost per enplanement (CPE) levels at both airports. CPE levels at IAD will approach $23 by 2012, up considerably from the $13.30 reported during fiscal 2003. Likewise at DCA, CPEs will rise to above $16 from the currently competitive $11.29. Though well above historic norms, Fitch notes that the signatory airlines approved the majority in interest provisions in the use and lease agreement and therefore approved the increase in debt service. Additionally, the forecast CPE levels are competitive with those reported at other large U.S. hub airports.

For additional information, see Fitch Research on 'Metropolitan Washington Airports Authority,' dated April 21, 2004, available on the Fitch Ratings web site at 'www.fitchratings.com'.