Nevada’s two biggest airports got bad ratings news this week.
Fitch Ratings downgraded the Clark County Airport System’s senior-lien revenue bonds to A-plus from AA-minus. The system operates Las Vegas’ McCarran International Airport, the seventh-busiest U.S. airport by passenger enplanements in 2008.
Fitch cut the issuer’s subordinate debt to A from A-plus and reduced its jet fuel and airport system junior-lien bonds to A-minus from A. The agency revised the outlook on the debt to stable from negative.
The move affects almost $1.5 billion of outstanding debt issued before 2008. Fitch does not rate the airport’s debt issued since then.
“The downgrades reflect the stress to the airport’s cost and financial profile, reflecting the continued weakness in economic and enplanement trends facing the Las Vegas air trade service area as well as the limited flexibility afforded by the largely debt-financed $3.4 billion capital program which is underway,” Fitch analysts Seth Lehman and Mike McDermott said in a report.
The rating agency said the airport’s use of variable-rate debt and swaps create “an elevated risk profile.”
Fitch also cut its outlook to negative on the Reno-Tahoe Airport Authority’s A-rated airport revenue bonds. The much smaller airport — the 63rd-busiest U.S. airport by passenger enplanements — has just $52 million of debt outstanding.
Both airports are suffering from declining passenger traffic as Nevada’s tourism-centered economy feels the effects of the worldwide economic slowdown. Reno-Tahoe passenger enplanements fell 12.7% in 2008, according to the Federal Aviation Administration. Las Vegas McCarran’s passenger traffic fell 6.7%. The results for fiscal 2008-2009 were even worse because the weakness in air traffic worsened markedly in the second half of 2008.
“Travel-demand weakness is likely to continue for the next several years,” Lehman and McDermott said in their Clark County report. “Heading into fiscal 2010, enplanements at McCarran are projected to be 20% lower than forecasts developed in early 2008, and as a result, budget reductions and increases to airline rates and charges are needed to minimize the erosions in financial margins.”
