Fitch: Transportation Infrastructure Sector Stable in 2013

WASHINGTON — The transportation infrastructure sector will be stable in 2013 despite any fiscal cliff fallout and long-term funding concerns, according to Fitch Ratings.

Airports, toll roads, ports, and grant anticipation revenue vehicle bonds all got the nod as stable from Fitch analysts in a new report. That represents an upgrade from last year, when Garvees and airports were both tagged with a negative outlook and Garvees saw some downgrades.

Airports are expected to see some modest growth, but also face considerable threat if a sequester triggered by the failure of lawmakers to reach a debt ceiling deal last year takes place. Fitch projects that airport traffic will continue to trend upward, though at a slower pace than in 2012. Growth will vary depending on the type of airport and whether it has competition in the region, the report states.

“Enplanement trends are likely to vary by airport type, with large hub and international gateway airports performing better relative to secondary hubs or regional airports with competition.”

The Federal Aviation Administration could be slammed with more than an 8% cut if the sequester occurs, which could affect airport ability to handle passenger volume due to staffing shortages in air traffic control and security. Chicago O’Hare International Airport and Dallas-Forth Worth International Airport are also on negative outlook due to potential changes in American Airlines’ operations post-bankruptcy.

Fitch views Garvee bonds as stabilizing after a year that saw billions of the highway trust fund-backed securities downgraded when federal lawmakers failed to pass a sustainable long-term revenue solution in the new transportation law. While most industry experts do not expect major highway funding policy changes in 2013, some lawmakers are floating the idea of increasing the federal gas tax that feeds the highway trust fund.

“Fitch will monitor progress on fiscal cliff budget negotiations, including any potential increases to the gas tax, in order to assess the potential impact on long-term Garvee funding,” the report states.

Ports and toll roads are both expected to be resilient despite challenges, and will continue to grow. Port infrastructure investment is a major focus at all levels of government, and Fitch expects the toll road sector to keep growing in the face of insufficient traditional highway investment. Toll roads could also provide support to state departments of transportation in 2013, transferring money from state tolling authorities to state departments of transportation, Fitch projects.

“Having toll entities cover interchange and other improvements is another way in which federal pressure is leading to increased leverage in the toll sector,” the report states.

The entire transportation sector could be challenged by the impact of the fiscal cliff scenario, however.

“If the economic effect of the fiscal cliff exceeds current estimates, tax increases and widespread spending cuts may affect transportation credits both directly, by reducing federal funding, and indirectly, by reducing demand at facilities due to widespread economic slowdown,” the report concludes. “A budget deal with less disruptive features would still pressure demand.”

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