Austin Funds Airport Growth With $275M Deal

abia-terminal-east-rndr.jpg

DALLAS — Austin, Texas will issue $275 million of revenue bonds to expand airport capacity and improve service for international flights.

The negotiated deal is scheduled to price Dec. 9 through senior manager Citi. RBC Capital Markets, Morgan Stanley, Piper Jaffray, Loop Capital Markets and Estrada Hinojosa & Co. are co-managers.

See related slide show.

 

Financial advisor Dennis Waley, managing director of PFM Group, said the deal will close on Jan. 6. Waley is a former Austin treasurer, a post now held by Art Alfaro.

The bonds carry ratings of A1 from Moody's Investors Service with a stable outlook.

"Our stable outlook is based on our expectation of continued strong enplanement growth that will keep airport financial metrics stable through a period of increasing leverage," Moody's analyst Earl Heffintrayer?wrote in his Dec. 1 report.

Austin Bergstrom International Airport opened on May 23, 1999 at the site of the former Bergstrom Air Force Base about five miles southeast of downtown. The airport replaced the landlocked Robert Mueller Airport, which was redeveloped into a mixed-use community.

The airport serves 11 commercial airlines, including British Airways, which launched its first Austin to London nonstop flight March 3. It was the first trans-Atlantic nonstop flight for Texas' capital city.

Southwest Airlines remains Austin's dominant carrier with 39% of the market, followed by American, United and JetBlue.

Enplanements have grown at a 4.6% annual rate since 2009 to 5.27 million passengers.

"The enplanement growth is among the strongest seen at airports classified as medium hub airports by the FAA," Heffintrayer wrote. "The airport's growth versus its main competitor, San Antonio International Airport, has been impressive."

ABIA projects continued strong growth over the next couple of years before falling back to a 2.5% rate at the end of the capital plan in fiscal year 2019.

The airport's five-year, $600 million capital plan will be funded from the Dec. 9 issue and another planned issuance in 2016, according to city officials.

The largest component of the project is the terminal and apron expansion project at $223 million. This project will extend the existing east concourse to add seven gates, though additional gates may be added as the design is progressed.

Construction already underway will fill in existing areas of the airport apron to ease aircraft taxiing.

"Moody's views the construction risk on the terminal as less risky than some other airport terminal renovation projects since the airport terminal is only 15 years old and free of asbestos exposure," Heffintrayer said. "The work is located outside of the main terminal and apron areas which should reduce effects on operations and provide for greater scheduling certainty."

The other large project in the capital plan is a $133 million parking garage structure to be combined with a consolidated rental car facility currently under construction. That project is financed by bonds backed by rental car fees.

According to census data, Austin is the eighth-fastest growing city in the United States. The Austin-Round Rock-San Marcos region grew faster than all large metropolitan areas in the nation last year, with 1.8 million people, according to census data. The Austin metro area includes Travis, Hays, Williamson, Bastrop and Caldwell counties.

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