"Toll rate adjustments to prevent or minimize revenue loss could prove difficult."
August 20, 2008
NEW YORK-- Fitch Ratings has revised the Outlooks for the U.S. Airports and Toll Roads sectors to Negative from Stable. According to the special report, 'U.S. Transportation Assets: Facing a Temporary Decline or a Permanent Change?', driving the outlook revisions are continued weakness in enplanements and toll-paying traffic that are being adversely affected by more than seven months of volatile fuel prices, economic weakness and inflationary pressures.
Fitch analysts say that given continued economic weakness coupled with an approximately 33% increase in gasoline prices and a 52% increase in jet fuel prices from 2007, U.S. airports and toll roads are now experiencing declines in enplaned passengers and toll paying traffic of as much as 18% and 16%, respectively.
To the extent the combination of volatile fuel prices and a weak economy persist for some time, management's ability to pass along cost increases through adjustments in terminal and airfield leases and toll rate adjustments to prevent or minimize revenue loss could prove difficult.
Fitch says enplanement and traffic reductions do vary significantly across the gamut of U.S. airports and toll roads given the varying economic strength and other competitive characteristics that exist in the airport and toll road sectors. To date, large hubs with an international component and expressway systems have fared slightly better than other categories of airports and toll roads. The overall trend by region shows that the economic situation in the southeast for both airports and toll roads appears to be the most challenging.
In Fitch's view, if the underlying pressures continue unabated over the next several years there is the potential for more fundamental change in airline pricing that could sustain the capacity reductions planned for the third and fourth quarters of 2008 - thus taking out a portion of the low fare capacity added over the last five years.
In addition to airports and toll roads, higher fuel prices, the slide of the U.S. dollar and the weakening economy have been impacting transit systems and seaports. While the Outlook for transit systems and seaports remains Stable, Fitch is in the process of analyzing sector and asset specific trends. A more detailed analysis of these sectors will be available in October.
Fitch will host a teleconference in early September highlighting key findings in today's special report and will issue a more comprehensive analysis of the airport and road sectors to highlight credits that are at risk in the current economic environment in late September.
Fitch's special report 'U.S. Transportation Assets: Facing a Temporary Decline or a Permanent Change?' is now available at www.fitchratings.com.
SOURCE: Fitch Ratings
Fitch Ratings, New York
Michael McDermott, +1-212-908-0605
Cindy Stoller, +1-212-908-0526 (Media Relations)
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