KUALA LUMPUR, July 27 ― Moody's has downgraded Malaysian Airport Bhd's (MAHB) rating to negative (A3) from stable due to the heavy risk facing its wholly owned Turkish subsidiary, the Sabiha Gokcen International Airport (SGIA), amid political uncertainties that followed a failed coup last week.

Moody's vice-president and senior analyst Ray Tay said it expected SGIA, which owns and operates the second-largest airport in Istanbul, Turkey, to experience a material decline in passenger traffic growth in the next 12 to 18 months.

"Growth in passenger traffic at SGIA could decline to low single-digits for 2016 and potentially 2017, and international travel, in particular, will likely be hit.

"Passenger service fees for international passengers are much higher than those for domestic passengers," Tay said in a statement today.

The international ratings agency said it expected the weakness in the Turkish operations.

But it noted that MAHB's Malaysia operations are experiencing modest growth following the series of airline disasters that occurred in 2014, as well as the completion of route rationalisation by Malaysia Airlines Berhad this year.

Moody’s said it expects low to mid-level growth in passenger traffic at MAHB’s Malaysian operations this year and next. It added that improvement will likely follow after.

Prior to the coup, traffic growth at SGIA was at least in the high teens over the past two years, which helped provide a mitigant against the slow recovery in passenger traffic growth at MAHB's operations in Malaysia.

"For these reasons, we lowered the BCA to baa3 from baa2 reflecting our expectation of a weaker financial profile over the medium term compared to previous expectation," Tay said.

Moody's said the negative outlook reflects the high degree of uncertainty over the next 12 months associated with passenger growth at SGIA.

It added that the three-notch uplift was made due to expectation that MAHB would receive assistance from Putrajaya, which is rated A3 stable.

"As such, an upward rating trend is unlikely, given that MAHB's A3 rating is at the same level as the sovereign rating for the Government of Malaysia and the negative outlook on MAHB's rating," it said.

It further stated that MAHB's rating could be downgraded if the Government of Malaysia's rating is downgraded.

MAHB operates five international, 16 domestic and 18 short take-off and landing airports in Malaysia. Its key revenue source is the Kuala Lumpur International Airport, which handled about 48.9 million passengers in 2015.

It also operates the Sabiha Gokcen International Airport in Turkey and has an airport

investment in India that is baa3 positive. SGIA handled 28.3 million passengers in 2015.