The Rating Outlook is Stable.
The rating reflects BosFuel's monopolistic position in providing an essential service to airlines at
KEY RATING DRIVERS
ESSENTIAL AIRPORT SERVICE: BosFuel has an effective monopoly on jet fueling services at
PROVEN DEMAND AND LIMITED CONCENTRATION: Annual sales are approximately 346 million gallons with 93% coming from BosFuel member carriers.
STRONG STRUCTURAL PROTECTIONS: There is a strong structural framework between the airlines using the fuel system and the fuel system operator, including airline reserve deposits and full step-up payments by the member carriers in cases of defaults or delinquencies from non-performing carriers. The debt service reserve is fully cash funded equal to one year of debt service.
ADEQUATE FACILITIES AND MODERATE COSTS: Fuel storage and distribution assets are adequate to meet projected needs. Estimated net member costs at about
NARROW REVENUE STREAM: The special facility bonds do not have recourse to the authority's general revenues or fund balances. Only the BosFuel facilities rental payments paid by airline carriers support the debt obligation.
--Significant deterioration in airport operations leading to a material decline in fuel demand could cause negative rating pressure.
--Carrier defaults or delinquencies in lease payments to BosFuel resulting in a material decline in financial performance could cause negative rating migration.
--Significant leverage for capital needs, without an offsetting revenue increase, could lead to negative rating action if financial metrics materially decline.
The series 2007 bonds are secured by a limited revenue stream of facilities rent payments made by Bosfuel under a fuel system lease. BosFuel collects revenues to support the required lease payments primarily from jet fuel to its member passenger and cargo carriers. The bonds are not secured by the general credit of MassPort.
The project continues to demonstrate stable operations. Fitch views the fuel distribution and storage system to be an essential component of airline operations at
Currently, there are more than 20 airline members of BosFuel, accounting for over 90% of estimated total fuel volume at the airport in 2013. Fuel volume through the system is estimated at 346 million gallons in 2013, a 2% increase from the prior year. Boston Logan has experienced essentially flat enplanement growth in fiscal 2013.
Consumption across all operating carriers at Boston Logan is highly diverse with JetBlue serving as the largest user at 26.3% of estimated total gallons pumped in 2013, followed by American at 11.5%, Delta at 10.9%, and United Airlines at 11.2%. JetBlue is also the largest carrier at the airport in fiscal 2013 in terms of enplaned passengers, representing 26.3% of the total. As was the case in earlier bankruptcy filings of passenger carriers, the project has the ability to draw on member reserve deposits in case of delayed payments or withdrawal that follows a bankruptcy event. Currently, BosFuel retains approximately
The average cost of BosFuel's operations, excluding terminalling and pipeline costs, is approximately
BosFuel is a
BosFuel assesses a net facilities charge on all member carriers equal to its costs of operation, with 90% of the charge based on volume of fuel a particular carrier pumps through the system relative to the total volume of fuel pumped through the system and 10% allocated equally on a per capita charge. While there is not a rate covenant, charges are set to cover all operating expenses and debt service annually. In the event of a default by a member carrier, the interline agreement that governs the consortium includes step-up provisions requiring additional payments from the non-defaulting airlines, in the form of a loan, to assure full and timely lease payments. Fitch believes the adequacy of the legal terms and financial framework of BosFuel has been demonstrated through its performance, with all payments made on a full and timely basis, during the recent spate of bankruptcies in the airline industry.
Additional information is available at 'www.fitchratings.com'.
--'Rating Criteria for Infrastructure and Project Finance',
Rating Criteria for Infrastructure and Project Finance
Source: Fitch Ratings
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