Fitch Rts Atlanta Hartsfield-Jackson Intl Airport, GA's $124MM GARBs 'AA-'.

Business Editors

NEW YORK--(BUSINESS WIRE)--Nov. 21, 2003

Fitch Ratings assigns a 'AA-' rating to the City of Atlanta, Georgia's approximately $124 million general airport revenue refunding bonds (GARBs) series 2003RF-D (subject to the federal alternative minimum tax) for Hartsfield-Jackson International Airport (ATL or the airport). The Rating Outlook is Stable. The bonds are scheduled to price on a competitive basis on Dec. 8.

The series 2003RF-D bonds will refinance approximately $122 million of ATL's outstanding series 1994B bonds and pay costs of issuance. The 2003RF-D bonds shift the debt from the 1977 ordinance (senior lien) to the 2000 ordinance (junior lien). Fitch also affirms the 'AA-' rating on ATL's approximately $161 million in outstanding senior lien airport revenue bonds and the 'AA-' rating on the airport's approximately $1.13 billion in outstanding junior lien airport revenue bonds.

The 'AA-' rating reflects ATL's position as the world's busiest airport, very low cost structure, status as the world headquarters of Delta Air Lines (Delta, senior unsecured debt rated 'B+' by Fitch Ratings), and relatively strong service area that ranks as the nation's 4th largest origination and destination (O&D) base. Credit concerns include the airport's significant level of connecting traffic (approximately 60%) and dependence on Delta, which exposes the airport to potential changes in airline scheduling decisions, as well as the overall weak fundamentals of the aviation industry and the current economic recession in the Atlanta MSA.

With 38.6 million enplaned passengers in fiscal year 2002 (Fiscal year-end Dec. 31), ATL again ranked as the world's busiest airport. In FY02, Delta and its wholly-owned subsidiary, Atlantic Southeast Airlines (ASA), accounted for 79% of total ATL passengers. Traffic at ATL hit an all-time high in December 2002, showing recovery from 9/11/01. To date, Delta's new low-cost subsidiary, Song Airlines, does not serve ATL. This dependence on the financial health and scheduling decisions of Delta represents a risk for ATL. Also in 2002 Air Tran, a low-cost carrier, accounted for 10.5% of passengers at ATL.

The strong operations at the airport generated gross revenue of $251 million in 2002. Of this amount, airlines serving ATL contributed about $80 million, or approximately 32%, and non-airline revenue accounted for the remaining $171 million, or approximately 68%, which Fitch considers stronger than industry average. Operating expenses, including planning for ATL's $6.4 billion capital improvement plan (CIP), totaled $93 million for the year, resulting in net revenues of $158 million. With debt service requirements of approximately $101 million, debt service coverage equaled 1.57(x), well above ATL's 1.20 (x) rate covenant. ATL's low airline cost per enplaned passenger (CPE) of $2.50, reflects the airport's significant non-airline revenue and high throughput of passengers.

ATL currently has $530 million of unrestricted cash, though about $330 million of this will fund portions of the CIP, and management intends to keep about $200 million in cash for contingencies. ATL's debt service obligation in fiscal year 2003 is about $105 million, and its debt service reserve fund has a requirement of about $110 million. ATL's current use and lease agreement with the airlines that expires in 2010 permits it to retain and build cash balances, after sharing certain excess revenues with the signatory airlines.

Like many other large-hub airports, ATL has a significant CIP, at roughly $6.4 billion (2000-2010). While cost estimates have risen by $1 billion since construction began, ATL's cost structure should adequately absorb this without significant credit risk. To finance the remainder of the CIP, ATL expects it sell roughly $1.3 billion in new money debt - including funds to take-out the $395 million series 2003 BANs - and about $300 million in special facility bonds for the proposed rental car facility.

The Atlanta MSA serves as the airport's primary market and ranks as the nation's ninth largest metropolitan area in terms of both population and economic output. The broad economy supports strong demand for air service, with the airport ranking as the nation's fourth largest in terms of origination and destination traffic. While the regional economy expanded at an 8.1% average annual rate for the 10 years ended 2001, compared to a 5.5% annual gain for the nation, of late economic activity slowed with the region's unemployment rate rising to 4.8% as of September 2003 from a low of 2.6% in December 2000.