The Dublin Airport Authority (DAA) could have its credit rating downgraded if the debts of Shannon and Cork airports impose too much of a financial strain on the company, an international ratings agency has warned.
The Government will have to make a decision on the debts of Cork and Shannon over the next few months.
It had been presumed over the last year that the debts of the two airports would pass onto the balance sheet of Dublin airport, but recently Minister for Transport Martin Cullen told this newspaper this was not necessarily so.
The London office of Standard & Poors said another major risk to the DAA came from the review of airport charges by aviation regulator Bill Prasifka. The ratings agency said it would be concerned that Mr Prasifka might sanction "lower than needed" charges and weaken the financial profile of the DAA.
The agency said while the Government's decision not to proceed with an independent terminal was good news for DAA, the company's future was still clouded with some uncertainty.
"DAA's competitive position is expected to remain strong," it said, but it warned that Mr Prasifka's review would be "key" for setting future ratings. At present the company has an A rating, but this might change in future.
"The financial profile is weak for an A category rating," said Standard & Poors.
"The main threats to the company's future financial profile are: lower than needed airport charges and the potential retention of liabilities associated with the assets to be transferred to Shannon and Cork airports without adequate financial compensation in the form of further charge increases in the future," it said.
It added: "If these two issues are resolved negatively for DAA, the financial profile could be too weak for the current rating for the next five years."
It says the Government has yet to decide how to proceed with the debts of Cork and Shannon airports. "This is an important future rating factor because DAA is expected to keep the liabilities but not the assets of these two airports".
While the note from the agency lists potential negative scenarios for the airports company, it also comments favourably on the overall outlook for the DAA.
"The ratings also reflect the company's strong commercial skills, a high level of origin-destination passengers passing through its airports and economic growth in Ireland."
Despite this, the note suggested an independent operator of the second terminal at Dublin airport could pose a threat to the competitive position of the DAA and the risks would increase with a third terminal.
"Over the longer term, the construction of a third terminal through an open competitive process would threaten DAA's position as the dominant provider of aviation infastructure in Ireland".
The note rejects the argument that DAA is too debt-laden. "DAA has sufficient financial flexibility," it said. It said about 80 per cent of the company's debt would not mature until after 2009.
