Ottawa Macdonald-Cartier International Airport Authority Ratings Affirmed At 'A+'; Outlook Is Stable

  • Ottawa Macdonald-Cartier International Airport Authority has a strong market position that benefits from generally stable traffic and declining debt levels.
  • We are affirming our 'A+' long-term issuer credit and senior secured debt ratings on the authority.
  • The stable outlook reflects our expectation that traffic and EBIDA growth will be low but constant, debt levels will continue decreasing, and liquidity will remain strong.
TORONTO (S&P Global Ratings) March 14, 2019--S&P Global Ratings today said it 
affirmed its 'A+' long-term issuer credit and senior secured debt ratings on 
the Ottawa Macdonald-Cartier International Airport Authority (the authority), 
operator of Ottawa International Airport (YOW). The outlook is stable.

The stable outlook reflects our expectation that, in the next two years, the 
authority's traffic and EBIDA growth will be modest but constant, generally 
following local real GDP, and reflecting the authority's strong market 
position. Debt levels will continue declining, resulting in debt to EBIDA of 
about 6x in 2020; however, the start of the repayment of one of the 
authority's bonds will have a negative effect on coverage levels. 
Nevertheless, we expect financial performance to remain strong with a debt 
service coverage ratio (DSCR) of about 2.2x in 2020. We also expect the 
authority to maintain a strong liquidity position.

Strong economic growth, leading to higher-than-expected traffic growth, and 
improved cash flows, resulting in debt-to-EBIDA declining to less than 5x, 
could lead to an upgrade in the next two years. A positive rating action could 
also occur if the federal government moved to assume significantly greater 
control of the authority through intervention, which could lead us to revise 
our assessment of the authority's limited link with the government to very 

We could lower the ratings if we saw weaker economic growth and increased 
shifts in airline carriers and routes to major hubs away from YOW, resulting 
in lower-than expected traffic and cash flows and increased reliance on bank 
indebtedness such that debt to EBIDA increased to more than 10x and the DSCR 
weakened and began approaching 1.25x. We consider this scenario unlikely in 
the outlook horizon.

The ratings reflect the authority's stand-alone credit profile (SACP), which 
we assess at 'a', and our opinion of a moderate likelihood that the Canadian 
government would provide extraordinary support in the event of financial 
distress, resulting in a one-notch uplift to the rating above the SACP.

The SACP reflects our opinion of the authority's strong enterprise risk 
profile and strong financial risk profile.

The enterprise risk profile reflects our view of the authority's:
  • Extremely strong economic fundamentals of the service area, reflecting its high GDP per capita with a history of stability due to the presence of a large public sector;
  • Low industry risk relative to that of other industries and sectors;
  • Strong market position as an airport in the Ottawa Census metropolitan area (CMA) that benefits from generally stable traffic, stemming from its high origin and destination (O&D) passenger mix, significant government-linked business travel, and a healthy local economy; and
  • Very strong management and governance, demonstrated by the authority's ability to mitigate key risks and record of achieving operational and financial goals.
The financial risk profile reflects our view of the authority's:
  • Strong financial performance, with forecast DSCR of about 2.2x in 2020;
  • Very strong debt and liabilities assessment, given the authority's improving debt metrics, with debt representing about 6x EBIDA in 2020; and
  • Strong liquidity and financial flexibility, evidenced by forecast unrestricted days' cash on hand of about 570 and unrestricted reserves to debt of about 32% in 2020.
The authority is a federally incorporated, independent, nonshare capital 
corporation exempt from provincial and federal income taxes. The authority 
signed a 60-year ground lease with Transport Canada effective Feb. 1, 1997, 
that entitles it to manage, operate, and invest in YOW, and has exercised the 
option to extend the lease for 20 more years. In our opinion, the federal 
government's regulatory stance on airports is among the most supportive in the 
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