Fitch Rates Indianapolis Airport $350MM Revs 'A+' Underlying; Outlook Stable

NEW YORK--(Business Wire)--
Fitch Ratings assigns an 'A+' underlying long-term rating to the
Indianapolis Local Public Improvement Bond Bank's variable rate bonds,
series 2008 C (Indianapolis Airport Authority Project). Nearer to
closing Fitch expects to assign a short-term rating based on the
standby purchase agreement from the Bank of New York Trust Co. and an
enhanced long-term rating based on an insurance policy from FSA. Fitch
also affirms its 'A+' underlying long-term rating on the bond bank's
$1.04 billion of outstanding bonds secured by airport revenues. The
Rating Outlook is Stable. The 2008 bonds are being issued to complete
construction of a new terminal building: the improvements had
previously been financed by the authority's commercial paper program
($220 million outstanding as of May 23, 2008).

The 'A+' rating for the authority reflects strong debt service
coverage, high internal reserve levels, a well-diversified mix of
carriers serving the airport and the broad economic base of the
Indianapolis metropolitan area. Credit concerns include the airport's
above average use of leverage, with long-term debt in excess of 10
times (x) operating revenues, rising costs through 2011 as the debt
service for the new terminal is included in rates and charges and the
economic challenges of the domestic airline industry due to rising
fuel costs and the potential for significant system-wide capacity
reductions in the last quarter of 2008. Should such reductions affect
Indianapolis, projected gains in non-airline revenues expected from
its new state-of-the-art terminal building, which is on-time and
on-budget for an October opening, could be less than anticipated.

The airport is the primary commercial facility serving the
Indianapolis metropolitan area and serves more than 4 million
passengers each year. It is the 44th largest passenger airport (93.5%
origin and destination) and the eighth largest cargo airport in the
nation. Enplanements were up 2.4% in 2007, following a 5% decline in
2006 enplanements due to fare increases and airline capacity cuts,
notably at ATA during its bankruptcy proceedings. Still, the airport
has demonstrated sustained growth, with enplanements rising 7.6%
annually since the last cyclical trough in 2003 through 2005, and a
2.2% average annual gain since 1990.

The authority's residual use and lease agreement extends through
Dec. 31, 2010 and provides the basis for its consistently sound
financial operations. Negotiations are ongoing to extend the agreement
through 2012. The airport's ability to generate substantial
non-airline revenue, which has historically represented 60% of total
operating revenue, sustains the airport's reasonable cost per enplaned
passenger (CPE), which equaled $7.26 in 2007. A large amount of air
cargo activity provides some diversity to the airport's revenue base
and helps maintain a competitive cost environment by distributing
airfield expenses across a broader customer base. FedEx operates its
second-largest global sorting facility at the airport and has
demonstrated its commitment to Indianapolis by undertaking a 600,000
square-foot expansion. Cargo traffic accounted for approximately 10%
of airport revenue in 2007. In addition to revenue from operations the
airport collects a $4.50 passenger facility charge (PFC) from each
enplaning passenger and a $3.00 customer facility charge (CFC) for
each contract day of car rentals transacted at the airport.

The new terminal represents the majority of the airport's current
capital program. With the opening of the facility, debt service
charges will be included in airline rates and charges beginning with
fiscal 2009, with the CPE expected to rise to approximately $9.50 and
peak at $11.05 in 2011. These figures are based on the airport's
consultant's forecast of a 3.3% average annual increase in
enplanements. Fitch ran a stress scenario with a 5% decline in
enplanements in 2009, with growth of 2% thereafter, which resulted in
a peak CPE of $14.84 in 2011.

Fitch forecasts strong debt service coverage for this airport,
with debt service coverage solely from net operating revenues
averaging 1.71x in 2008-2012, and debt service including non-operating
items (PFCs, CFCs, federal payments, and fund transfers) averaging
2.25x. The authority held $363 million in cash ($44 million
unrestricted) as of fiscal year end 2007.

Fitch's rating definitions and the terms of use of such ratings
are available on the agency's public site, www.fitchratings.com.
Published ratings, criteria and methodologies are available from this
site, at all times. Fitch's code of conduct, confidentiality,
conflicts of interest, affiliate firewall, compliance and other
relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings
Andrew Abramczyk, +1-212-908-0596 (New York)
Peter Stettler, +1-312-368-3176 (Chicago)
Christopher Kimble, +1-212-908-0226
(Media Relations, New York)

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