DBRS Morningstar Changes Trend on Vancouver Airport Authority to Stable, Confirms Ratings at AA (low)

DBRS Limited (DBRS Morningstar) changed the trends on Vancouver Airport Authority’s (VAA or the Authority) Issuer Rating and Senior Debentures rating to Stable from Negative and confirmed both ratings at AA (low). The trend changes are mainly driven by the robust traffic recovery observed to date during 2022, instilling confidence that DBRS Morningstar’s base-case forecast will materialize as expected.

Traffic volume has recovered continuously through the first nine months of 2022. As of September 30, 2022, total year-to-date passenger volume reached approximately 13.8 million, or 68% of the 2019 level, with total monthly traffic in September hitting 82% of the pre-pandemic level. During Q3 2022, volumes of domestic, international, and transborder sectors stood at 91.6%, 60.3%, and 81.4% of their respective 2019 levels. Partly because of the limited access to China, the Asia Pacific segment continues to be the slowest to recover, reaching only 51% of its pre-pandemic traffic level in September 2022 on a monthly basis. DBRS Morningstar notes that historically the Asia Pacific segment contributed only approximately 17% of total traffic volume and, compared with other tier-one Canadian airports, VAA has relied more on the domestic sector in its passenger mix, lending some support to the resilience of its performance.

Based on the unaudited non-consolidated interim financial statements, VAA’s EBITDA for the nine months ended September 30, 2022, reached $164.9 million, compared with $208.0 million during the same period in 2019, also better than expected. Liquidity is healthy with approximately $387 million of cash and short-term investment as of September 30, 2022—an increase of $28 million from the beginning of the year. Liquidity is further supplemented by approximately $427 million of undrawn committed funds under the Authority’s revolving credit facility.

DBSR Morningstar draws comfort from the Authority’s conservative management and relatively low airport improvement fees, which potentially can be increased to supplement sources of funds for the Authority’s future capital needs. While not expected, the ratings may be negatively affected should traffic outlook become materially negative over the medium term or if the annual leverage increase substantially outpaces traffic recovery.

ESG CONSIDERATIONS
There were no Environmental/Social/Governance (ESG) factors that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929 (May 17, 2022).

Notes:
All figures are in Canadian dollars unless otherwise noted.

The principal methodology is Rating Airports (May 25, 2022; https://www.dbrsmorningstar.com/research/397283/rating-airports), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

A description of how DBRS Morningstar analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/397223.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrsmorningstar.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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