S&P: Halifax International Airport Authority Outlook Revised To Positive From Stable; 'A+' Ratings Affirmed
"The outlook revision reflects our view that, despite a tepid economic environment and significant disruptions to operations because of weather events in the previous year, the authority will continue to maintain strong operating performance and a healthy financial profile, comparing positively with those of similarly rated peers," said S&P Global Ratings credit analyst Hector Cedano.
The ratings reflect the HIAA's stand-alone credit profile (SACP), which S&P Global Ratings assesses at 'a'. The ratings also reflect our opinion that there is a moderate likelihood that the Canadian government would provide extraordinary support to the authority in the event of financial distress, resulting in a one-notch uplift to the issuer credit rating.
We believe the HIAA has a monopoly position delivers an essential transportation service in its underlying service area, Halifax Regional Municipality and Nova Scotia, in general. It also serves as a hub for many smaller communities throughout Atlantic Canada. The authority estimates its catchment area to be about 1.6 million people, encompassing Nova Scotia, Prince Edward Island, and southern New Brunswick. In our view, the province's mature and reasonably diversified economy has given the authority relatively stable, albeit modest, passenger growth potential in the medium term.
The positive outlook reflects our view that, despite a tepid economic environment, the authority's business and financial positions remain strong. In the next two years, we expect that the HIAA's enplaned passenger volume will increase, total debt will remain around C$150 per enplaned passenger and DSCR will remain well above 2x in 2017. In addition, we do not anticipate any change to our assessment of a moderate likelihood that the Canadian government would provide extraordinary support to the authority in the event of financial distress in the next two years.
We could raise the ratings if the HIAA consistently maintains its financial strength in the next two years, with a stable debt per enplanement ratio and a sustained DSCR of more than 2.5x. An increase in the likelihood of extraordinary support derived from a stronger link with the federal government could also result in a positive rating action. This could result from an increased oversight and direction of all Canadian airport authorities (CAAs).
We could revise the outlook to stable if the federal government introduced potentially negative changes to the authority's regulatory environment, including limiting its unfettered ability to set or raise fees (alongside other CAAs), or if we observed a sustained weakening in the authority's financial metrics versus our expectations.