Texas Airports Outpacing Last Year With $1.3B Issued

bb112911deal.jpg

DALLAS — Amid major redevelopment projects at large airports in Texas, aviation bond issuance there is running at the highest level since 2003, according to data from Thomson Reuters.

With one month left in the year, Lone Star airports have issued nearly $1.3 billion of bonds, a nearly 60% increase over the entire year of 2010.

In a lean year for municipal bonds after the demise of Build America Bonds, airport issues through November represent 13.1% of the Texas market, the highest share since 2003, when airport bonds were 16.8% of the bond market. The share was only 8.2% last year.

The rising issuance comes as two airports in the Dallas-Fort Worth area undergo major remodeling, along with revisions to airports in Houston and San Antonio.

Houston reached agreement with United Airlines in August on a $1 billion deal to remodel Terminal B at George Bush Intercontinental Airport to accommodate Boeing’s new 787 Dreamliner jet and provide roomier lounges, more restrooms and other amenities.

The deal came 10 months after United merged with Houston-based Continental Airlines.

At Dallas-Fort Worth International Airport, a $1.9 billion renovation of the four original terminals is well underway.

A new light-rail link from Dallas Area Rapid Transit is also approaching the airport.

Nearby Dallas Love Field is redeveloping its terminal in a project financed by $310 million of bonds backed by revenues from Southwest Airlines, the major tenant at the smaller in-town airport.

In San Antonio, the city’s Aviation Department is operating under a long-range Vision 2050 Airport Master Plan that was approved by the City Council on March 31.

The undertaking calls for $191 million in capital improvements over the next five years.

Last year, the airport opened Terminal B as part of the major expansion plan launched in 1998. Terminal B is home to Continental Airlines and American Airlines.

In addition to Terminal B, the recently completed expansion project included a new long-term parking garage, a bi-level roadway system, consolidated baggage handling system and a new central utility plant.

Under the short-term $191 million bond plan, airport officials are planning to renovate the 26-year old Terminal A to provide more space for the passenger security screening checkpoint and the baggage claim area.

They will also build a six-story consolidated rental car facility to connect rental car services to the terminals via pedestrian bridges and eliminate the need for shuttles.

Bond proceeds will also be used to buy property outside the existing airport to relocate and expand the rental car storage and maintenance facilities along with the employee and economy parking lots.

Funds will also go toward reserving on-site parcels for commercial aviation development, including general aviation, aircraft maintenance and manufacturing facilities, officials said.

An additional $815 million of capital projects are planned over the next 20 years, including acquiring land to control the runway protection zones, upgrading a runway from general aviation to full carrier use, extending Terminal A to the south to provide two additional aircraft gates, building a new Terminal C and adding more property for intermodal transportation.

Like other such facilities, the San Antonio airport has struggled to develop long-term plans amid the ongoing political standoffs in Congress.

Airports are seeking a higher limit for passenger facility charges, and they want a permanent return for the alternative minimum tax holiday that their tax-exempt bonds enjoyed under the federal stimulus program.

Airports sold some $12.7 billion in private-activity bonds in 2009 and 2010 that benefited from the AMT holiday. PAB issuers were allowed to sell bonds with tax-exempt interest that isn’t subject to the federal alternative minimum tax, rendering them unattractive to many investors, according to the Airports Council International-North America.

“If the federal government isn’t going to fully fund the nation’s needs for airport infrastructure maintenance and improvement, then Congress needs to give local communities the legal authority to do that, so that airports can determine their own futures,” Frank Miller, aviation director for San Antonio, said in a joint statement issued after a meeting of Texas airport executives in Houston in September.

Miller was among those airport executives who have voiced their concerns about coping with growth amid reduced funding.

“Congress needs to permanently reclassify airport bonds to avoid making these bonds more expensive and less attractive to investors,” said Mario Diaz, director of the Houston Airport System. “It would help airports become more self-sufficient financially and allow us to fund the kinds of projects that will help kick-start our economy.”

San Antonio, the second most populous city in the state, aims to keep pace with other airports that handle more passengers.

In San Antonio, Fitch Ratings recently affirmed its A-plus rating on bonds secured by a first lien on the revenues generated by the airport system. The PFC-subordinate bonds are secured by a senior lien on passenger facility charge revenue and a subordinate lien on general airport revenue.

With some competition from Austin, 70 miles to the north, San Antonio International saw enplanements increase 1.5% in fiscal 2011 to 4.08 million, driven largely by the economic growth in the local service area, according to Fitch analysts.

On Dec. 9, 2010, San Antonio priced $100.4 million of airport revenue refunding bonds with insurance from Assured Guaranty Municipal Corp. for ratings of AA-plus from Standard & Poor’s and Aa3 from Moody’s Investors Service.  The underlying ratings were A-plus and A1, respectively.

The refunding bonds drew yields of 4.75% for 4.5% coupons in 2025.

For reprint and licensing requests for this article, click here.
Transportation industry Texas
MORE FROM BOND BUYER