S&P: Vancouver Airport Authority 'AA' Ratings Affirmed On Strong Operating And Financial Performance
The ratings reflect the VAA's stand-alone credit profile (SACP), which S&P Global Ratings assesses at 'aa'. The ratings also reflect our opinion of a moderate likelihood that the Canadian government would provide extraordinary support in the event of financial distress, resulting in no uplift to the ratings.
"The SACP on the VAA reflects, in part, our assessment of the authority's unimpeded rate-setting autonomy, and its monopoly position in delivering an essential transportation service," said S&P Global Ratings credit analyst Dina Shillis.
We believe the VAA has a strong and captive passenger base by virtue of its monopoly on airport services in the City of Vancouver and, more broadly, the Province of British Columbia. The authority operates and develops Vancouver International Airport, the province's primary international airport and the second-busiest airport in Canada by aircraft movements and passengers. Its origination and destination passenger mix is relatively high, in our view, at an estimated 74%. As a result, its air travel demand profile depends primarily on the performance of the local and provincial economies, which we consider affluent and diverse. We expect the authority's strong passenger base and relatively high O&D passenger mix to contribute to stable operating cash flows in the next two years
The stable outlook reflects our view that, in the next two years, the VAA's enplaned passengers will increase in line with expectations, debt metrics will remain very strong, and the airport will maintain available liquid assets of more than 100% of operating expenses.
We could take a negative rating action if financial metrics weakened significantly, including debt per enplaned passenger of more than C$90, or the authority's regulation underwent potentially negative changes, including limiting its unfettered ability to set or raise fees (alongside other Canadian airport authorities).
Conversely, we could take a positive rating action if very strong growth in passengers and reduced reliance on debt funding resulted in significant improvement in debt metrics, including debt per enplaned passenger falling to less than C$30. Given the VAA's capital spending plans, we view this scenario as unlikely in the next two years. In addition, although also unlikely in the outlook horizon, we could raise the ratings if the federal government assumed significantly greater control of the authority though intervention, which could result in a change of our assessment of the VAA's limited link with the government to very strong.