Research Update: Melbourne Airport Rating Lowered To 'BBB+' On Prolonged Traffic Recovery Due To COVID-19; Outlook Negative

Weak global economic conditions and social distancing measures in the aftermath of the COVID-19 pandemic have brought air travel to a near halt, will dent air travel in 2021, and will likely result in a long recovery phase to pre-COVID-19 levels. Reduced cash flows over fiscal years 2020-2022 will weaken Australia Pacific Airports Corp. Ltd.'s (APAC or Melbourne Airport) FFO to debt in fiscal years 2020 and 2021, before recovering to about 9%-9.5% from fiscal 2022 assuming appropriate control on costs, capex, and dividends. On June 16, 2020, S&P Global Ratings lowered the long-term issuer credit rating on Melbourne Airport and issue credit ratings on the airport's debt to 'BBB+' from 'A-'. We also removed the ratings from CreditWatch, where

...- Weak global economic conditions and social distancing measures in the aftermath of the COVID-19 pandemic have brought air travel to a near halt, will dent air travel in 2021, and will likely result in a long recovery phase to pre-COVID-19 levels. - Reduced cash flows over fiscal years 2020-2022 will weaken Australia Pacific Airports Corp. Ltd.'s (APAC or Melbourne Airport) FFO to debt in fiscal years 2020 and 2021, before recovering to about 9%-9.5% from fiscal 2022 assuming appropriate control on costs, capex, and dividends. - On June 16, 2020, S&P Global Ratings lowered the long-term issuer credit rating on Melbourne Airport and issue credit ratings on the airport's debt to '###+' from 'A-'. We also removed the ratings from CreditWatch, where we placed them with negative implications on March 20, 2020. - The negative outlook mainly reflects continued uncertainty on the timing and pace of recovery in air travel over the next 12 months, particularly international travel. This will influence...

Research Update