OREANDA-NEWS. Fitch Ratings says its rating outlook for EMEA transport infrastructure in 2H15 is stable, underpinned by economic stabilisation across most of the eurozone (EZ) countries. Cheap funding is easing the debt load while low inflation weighs on tariff increases. Still, some tail risks to economic recovery persist, namely the development in Greece. Approximately 93% of the ratings in Fitch's EMEA transport portfolio are on Stable Outlook.

Traffic performance is improving as large toll road networks gradually return to pre-crisis traffic levels. Airports are benefitting from growth in passenger traffic. Some of the assets that had been exposed to weakened economies, such as Spain and Portugal, are rebounding, while others, including Italy, are stabilising. However, positive rating actions are unlikely in the near term given the limited visibility on long-term traffic evolution.

Fitch's rating case (which allows for some downside to its base case) is based on prudent forecasts for all main credit drivers, some of which may be sensitive to macro-economic developments. Our traffic growth expectations reflect a gradual economic recovery of southern European countries (Spain, Italy, and Portugal). Nevertheless, most ratings would remain unchanged on the back of slow recovery in the next quarters.

Owners of infrastructure assets with corporate-type financing have used favourable market conditions to lock in cheaper debt for refinancing, thus reinforcing existing debt structures/metrics.

In 1Q15 traffic rebounded materially in Spain and Portugal, increased in France and stabilised in Italy. Fitch expects the stabilisation trend on European toll-road networks to continue in 2H15, driven by economic recovery. Low inflation will reduce tariff increases and hence weigh on concessionaires' revenue growth.

Air traffic is regaining momentum. Fitch's base case assumes that passenger air travel will continue to grow in 2H15. All Fitch-rated European airports have Stable Outlooks.

Fuel prices have fallen materially in 1H15. The effect on road, air and sea traffic is viewed positively, though modest in the near term.

An adverse macroeconomic shock impacting EZ economic and traffic recovery could lead to the Outlook being revised to Negative for the transport infrastructure sector.

An extended period of low general inflation/deflation is not included in Fitch's rating cases. Were this to change, a change of Outlook could follow. Further evidence of structural economic recovery in EZ might justify a revision in Outlook to Positive for the transport infrastructure sector.

The report, 2015 Mid-Year Outlook: EMEA Transport Infrastructure, is available on www.fitchratings.com or by clicking the link above.