Fitch Rates Capital Region Airport Commission (VA) $50.64MM REVS 'A-'

Outlook Stable

The 'A-' rating reflects the airport's strong service area in the state's capital and resultant solid passenger market with a high origination and destination (O&D) traffic base, good air carrier diversity, consistently sound financial operations, and a modest capital improvement program through 2012. Credit challenges include moderate susceptibility to changes in air carrier service, a somewhat competitive market with nearby Norfolk International, Newport News/Williamsburg International, and Washington Dulles, and a slightly above average debt burden. Driving the stable outlook is the airport's minimal future borrowing needs and relevant service additions that should bolster the airport's financial performance.

Richmond International Airport is located in central Virginia approximately eight miles from Richmond's central business district and serves the population of 16 counties and four cities. The economic base of the region includes not only the state capital but the headquarters of five Fortune 500 companies and 10 Fortune 1000 companies.

Enplanement growth at the airport has been supported by underlying demographic and economic strengths as well as the recent service initiation by low-cost carries, including AirTran Airways (in June 2005), JetBlue Airways (in March 2006), and SkyBus Airlines (in May 2007). Enplanements were down in fiscal year (FY) 2002 following the Sept. 11, 2001 terrorist attacks, but rebounded by a five-year average of 9.4%.

The airport enjoys a diverse mix of network and regional carriers, with US Airways and Delta Air Lines currently accommodating 25.1% and 25% of the airport's enplaned passengers, followed by American Airlines with 11.3%, and United Airlines with 9.9%. Fitch expects enplanements to grow in FY 2008 due to new service to Fort Lauderdale, FL by JetBlue, an additional flight to Columbus, OH by SkyBus, and two daily flights to Toronto, by Air Canada.

Overall financial performance at the airport has been relatively stable. The airport recorded 49.7% operating margin for FY 2007, slightly up from the average margin of 48.8% over the prior four years, while debt service coverage equaled a strong 2.47 times (x), up from 2.25x in 2006, well above the airport's 1.25x rate covenant.

Revenues increased at a 7.2% average annual rate from 2004-2007, largely due to growth in parking and concessions. Expenses increased at a 6.2% average annual rate due to higher personnel costs. Annual debt service coverage during this period ranged from a high of 2.47x in 2007 to a low of 1.85x in 2003. The airport's cost per enplaned passenger is budgeted to be $5.59 in FY 2008, increasing to a maximum of $5.88 in FY 2014.

The airport's modest 2007-2012 capital program totals approximately $125 million, with the largest projects including terminal building and access road enhancements. The airport plans to finance these projects through a variety of revenue sources including $15.3 million in federal funds, $26 million in state grants, $10.7 in passenger facility or customer facility charges, and $27.4 million of local funds. The airport does not expect to issue any debt in addition to these revenue bonds.

Contact: Emari Kotake, +1-312-606-2308 or Peter Stettler, +1-312-368-3176, Chicago.

Media Relations: Cindy Stoller, New York, Tel: +1 212 908 0526.

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