Ebola threat to airport credit ratings

Airports are likely to see a sudden drop in passenger numbers should Ebola spread globally, with Auckland International Airport’s [NZX:AIA] credit rating most likely of local airports to take a hit, Standard & Poor’s research shows.

Standard & Poor’s credit analysts examined what would happen to airport credit ratings if Ebola forced a similar passenger pattern to the Severe Acute Respiratory Syndrome (SARS) epidemic just over 10 years ago.

Following that scenario, it is assumed there would be a 10% drop in international passenger numbers during 2015 but recovering to 2014 levels by the end of 2016. Passenger numbers would return to normal levels in 2017.

However, Asia Pacific analyst Thomas Jacquot says in the report the whole airport sector would not be materially affected and the overall credit quality should remain somewhat stable.

"While we see certain airports showing greater resilience to our scenario, the greater risk faced by others is only relative and do not necessarily reflect a high probability of rating action.”

Credit ratings would be affected by the extent to which an airport is exposed to international passenger traffic, and how diverse revenue streams are. 

The analysts found the potential financial metrics impact for Australasian airports would be greatest for Auckland International Airport and Brisbane Airport, because of exposure to international passenger numbers, and current capital expenditure means less room financially to cope with dropping passenger levels.

There would be also be medium impact on Sydney Airport, Melbourne Airport and Perth Airport, while the impact on Wellington Airport, Christchurch Airport and Adelaide Airport would be low, due to less international traffic.

S&P said transtasman traffic might not be as affected as long-haul flights. “In short, the higher the exposure to international traffic, the higher the potential ratings impact. Saying that, revenue diversity then provides a degree of mitigation. This is the combination that ultimately is at the heart of the expected overall impact on the overall sector.”

Ebola cases have mainly been confirmed to West Africa, except for isolated cases in Europe and the US.

According to the World Health Association, there have been 13,268 confirmed, probable and suspected cases of Ebola virus reported. There have been 4960 deaths.