PHOENIX - The agreement to return control of the LA/Ontario International Airport from Los Angeles to an Ontario, Calif.-based local authority is a positive for the Los Angeles airport but negative for the Ontario airport's credit, Moody's Investors Service said Monday.
The Los Angeles City Council approved the deal in closed session Dec. 16 and Ontario followed suit the next day. The agreement ends a legal dispute between Ontario and Los Angeles and initiates a process to put the Inland Empire airport under the control of the new Ontario International Airport Authority.
Ontario will pay $30 million from its reserves, take over the airport's $60 million debt and make payments to Los Angeles of $50 million over five years and $70 million in the final five years, officials said. Los Angeles World Airports, which has run Ontario's airport since the 1960s and which also manages Los Angeles International Airport and Van Nuys Airport, will transfer $40 million from Ontario airport's unrestricted cash accounts to Los Angeles International Airport.
"The agreement, which must still be approved by the Federal Aviation Administration, initiates a process, which we expect will take one to two years, that will allow the two parties to move to financial close," Moody's said.
The move will hurt Ontario airport, currently rated Baa1 by Moody's with a stable outlook, while strengthening the Los Angeles airport enterprise, currently rated Aa3 with a positive outlook.
"The settlement agreement will increase ONT's liabilities approximately 190% and decrease its cash approximately 25%," Moody's said. "It will also improve the Moody's-adjusted calculation of LAX's cash and discretionary reserves 11% once financial close is reached."
ONT will also be required to issue bonds to retire $63 million of outstanding bonds that were issued by the Los Angeles Department of Airports for Ontario, Moody's said. The rating agency said it does not believe the ownership change will significantly impact passenger numbers at either airport.
Ontario Mayor pro Tem Alan Wapner and officials from other nearby Inland Empire cities spent seven years trying to convince Los Angeles officials to cede control of the Ontario airport. The airport is in San Bernardino County about 40 miles east of Los Angeles.
