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Announcement:

Moody's takes rating actions on 11 European airports

31 Mar 2020

London, 31 March 2020 -- Moody's Investors Service (Moody's) has recently taken rating actions on the following 11 European airport companies:

- Ratings placed on review for downgrade: Avinor AS (A1, rating under review), Copenhagen Airports A/S (Baa2, rating under review), Copenhagen Airports Denmark ApS (Baa3, rating under review), Gatwick Funding Limited (Baa1, rating under review), Manchester Airport Group Funding Plc (Baa1, rating under review), Milione S.p.A. (Baa3, rating under review)

- Outlook changed to negative from stable: Aena S.M.E., S.A. (A3, negative), Brussels Airport Company NV/S.A. (Baa1, negative), Heathrow Finance plc (Ba1/Ba3, negative), Royal Schiphol Group N.V. (A3, negative)

- Rating affirmation with a stable outlook: Letiste Praha, a.s. (Aa3, stable).

The rating actions are triggered by the unprecedented traffic declines at European airports as a result of severe restrictions to air travel, cancellation of airline routes and closing of borders in light of the rapid and widening spread of the coronavirus (COVID-19) outbreak.

In addition to the above, Moody's has the following ratings outstanding in the European airport sector: Aeroporti di Roma S.p.A. (Baa3, negative), Aeroports de la Cote d'Azur (ACA) (Baa2, rating under review), Azzurra Aeroporti S.p.A. (Baa3, rating under review), Birmingham Airport (Finance) Plc (Baa1, rating under review) and Flughafen Berlin Brandenburg GmbH (A1, stable).

RATIONALE FOR RECENT RATING ACTIONS

The rapid and widening spread of the coronavirus outbreak, the deteriorating global economic outlook, falling oil prices and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The airport sector is among the most significantly affected by the shock given its exposure to travel restrictions and sensitivity to consumer demand and sentiment.

Moody's current base case assumption is that the coronavirus pandemic will lead to a period of severe cuts in passenger traffic over the upcoming weeks given restrictions on travel, but that there will be a gradual recovery in passenger volumes starting by the third quarter 2020.

Unlike previous negative shocks such as the SARS epidemic in 2003, the prospects for traffic rebound is more uncertain because (1) travel restrictions in some form may continue for some time even if the spread of the virus seems contained; (2) the deteriorating global economic outlook would likely slow the recovery in traffic and consumer spending, even if travel restrictions are eased; and (3) the coronavirus outbreak is also weakening the credit profile of airlines, which have been drastically cutting capacity. As events continue to unfold, there is a higher than usual degree of uncertainty around the length of travel restrictions and drop in travel demand. Hence, it is difficult to predict the overall traffic volumes for 2020.

Nevertheless, Moody's currently assumes that the decline in passenger traffic will be at least 30% in 2020 compared to the previous year, driven by dramatic declines in the first half of the year and a recovery in the second half, albeit phased over the period. There are, however, high risks of more challenging downside scenarios.

The longer term impact of the coronavirus pandemic still remains difficult to assess, given airports' exposure to airlines, which are themselves under significant stress. However, and notwithstanding the significantly reduced cash flow over at least the next few weeks, Moody's still considers airports located in large cities, including in capital cities, and airport networks covering large countries, to be key infrastructure providers, with a potential for traffic recovery once the coronavirus outbreak and its effects have been contained.

Given Moody's current assumption that the travel restrictions will be eventually lifted or at least significantly reduced, the key differentiating factors in positioning of European airports' ratings are issuer-specific (1) liquidity position and ability to withstand a period of no income generation either because of travel restrictions or management decision not to collect charges; (2) headroom against financial covenants included in the debt documentation; and (3) positioning in the rating category against the guidance in the context of Moody's current assumptions regarding traffic evolution and measures that the companies and their shareholders may be able to take to mitigate the impact of reduced passenger traffic this year.

For those ratings under review, the rating review will specifically consider (1) companies' access to liquidity; and (2) potential management and shareholder measures to mitigate the impact of substantial declines in traffic on the companies' credit metrics and covenants. Moody's will further consider the evolution of the operating environment, including the extent and timeframe for air travel restrictions as well as companies' exposure to airlines. Moody's will endeavour to conclude the review for each of the affected companies as soon as practical.

For more detailed information on individual issuers, please see the following press releases:

Ratings placed on review:

Avinor AS:

https://www.moodys.com/research/Moodys-reviews-Avinors-A1-ratings-for-downgrade--PR_421075

Copenhagen Airports A/S:

https://www.moodys.com/research/Moodys-reviews-Copenhagen-Airports-ratings-for-downgrade--PR_421218

Gatwick Funding Limited:

https://www.moodys.com/research/Moodys-reviews-Gatwick-Fundings-Baa1-ratings-for-downgrade--PR_421072

Manchester Airport Group Funding Plc:

https://www.moodys.com/research/Moodys-reviews-Manchester-Airport-Group-Fundings-Baa1-ratings-for-downgrade--PR_421068

Milione S.p.A.:

https://www.moodys.com/research/Moodys-reviews-Miliones-Baa3-ratings-for-downgrade--PR_420263

Outlook changed to negative:

Aena S.M.E., S.A.:

https://www.moodys.com/research/Moodys-changes-to-negative-the-outlook-on-Aenas-rating--PR_421220

Brussels Airport Company NV/SA:

https://www.moodys.com/research/Moodys-changes-rating-outlook-on-Brussels-Airport-to-negative-from--PR_420257

Heathrow Finance plc:

https://www.moodys.com/research/Moodys-changes-to-negative-outlook-on-Heathrow-Finances-ratings--PR_421272

Royal Schiphol Group N.V.:

https://www.moodys.com/research/Moodys-changes-rating-outlook-on-Royal-Schiphol-Group-to-negative--PR_421219

Ratings affirmed:

Letiste Praha, a.s.:

https://www.moodys.com/research/Moodys-affirms-Letiste-Praha-ass-Aa3-rating-outlook-stable--PR_421221

Moody´s regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety that lead to severe restrictions to air travel, cancellation of airline routes and closing of borders, as well as enhanced health and safety standards and regulation potentially resulting in additional compliance expenses and potential non-compliance costs in the form of fines.

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: London +44-20-7772-5456, New York +1-212-553-0376, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Joanna Fic
Senior Vice President
Infrastructure Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Andrew Blease
Associate Managing Director
Infrastructure Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
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