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Liquidity seen to allow airports withstand virus

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By Arjay L. Balinbin, Reporter

THE strong liquidity position of airports in the Asia-Pacific region will enable them to withstand the impact of the coronavirus disease 2019 (COVID-19) outbreak that has forced several airlines to suspend their flights to and from China and its administrative regions, Moody’s Investors Service said.

“Asia-Pacific airports are generally well-positioned to manage the challenges posed by a quick containment of the coronavirus because of their strong liquidity,” Moody’s Investors Service said in its report e-mailed to reporters on Thursday.

Moody’s noted that airport revenues are likely to be affected by the coronavirus epidemic, which is “curtailing” the region’s airline traffic.

It said the crisis brought by the coronavirus, which has killed more than a thousand people and sickened tens of thousands more in China, is a “credit negative” for Asia-Pacific-based airports.

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Rated airports in the region, according to Moody’s, face more “acute risks” than their global peers because of the bigger number of their Chinese passengers and their proximity to countries with confirmed cases of the virus.

For an example, Australia Pacific Airports (Melbourne) Pty Ltd., which has been assigned A3 ratings, “is more exposed to the disruptions resulting from the coronavirus outbreak, reflecting the airport’s relatively high exposure to China in combination with its large investment pipeline,” Moody’s said.

But such risks are “balanced by the airport’s track record of maintaining its credit profile as well as its strong liquidity position,” it added.

Moody’s explained further: “While the coronavirus poses immediate challenges to airport revenue growth, the fundamentals of these businesses are likely to remain intact and sustainable over the long term, reflecting their strong market positions as providers of essential services and leverage to rising incomes in the Asia-Pacific region.”

Most of the rated airports in Asia-Pacific region, according to Moody’s, generate solid free cash flows and are able to defer their investment programs.

“This factor provides a buffer to manage a short-term decline in aviation demand,” Moody’s said.

The impact will also depend on the duration of the coronavirus-related disruptions in the industry. Moody’s said the coronavirus outbreak could continue disrupting flight operations in the region even in the next two to three quarters, basing it on “past experiences from the manifestation of event risks — such as the Severe Acute Respiratory Syndrome (SARS) outbreak in 2003.”

Air Carriers Association of the Philippines, Inc. (ACAP) has said it was expecting to lose around P3 billion from ticket refunds in the next two months following the China travel ban.

Moody’s has also said that banks in the Asia-Pacific region could suffer from potential loan defaults if the borrowers, specifically the companies involved in these sectors, will face prolonged suspensions in their operations.

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