DALLAS - Management of an airport may be the most important component in rating a facility's general revenue bonds but it is one that cannot easily be quantified, Kroll Bond Rating Agency said in a new methodology report.
"As a consequence, KBRA believes that an extensive qualitative analysis and comprehensive discussion of management is required to fully dimension its critical importance," said Kroll senior director Harvey Zachem and senior managing director Karen Daly.
The other five determinants in the Kroll rating formula include airport debt and capital needs, airport finances, area economics, utilization, and legal provisions.
Airport management is different from other public finance bond sectors because of the relationship with airlines and other private sector entities as well as with other tenants, passengers, and the local community, they said.
Airport management teams must also deal with federal aviation regulations, the ups and downs of the airline industry, and changes in travel patterns, the report noted.
Zachem and Daly said Kroll "highly values" management experience due to the level of complexity involved in running a large airport.
Kroll studies how a facility is governed when it reviews an airport's management during the credit rating process for general revenue bonds.
"To that end, KBRA typically requests biographical information regarding senior airport management," they said.
The information sought by Kroll includes the day-to-day operational autonomy of the airport governing board, including responsibility for forecasting, the oversight of capital plans, and debt management policies.
Kroll analysts look favorably on airports with formal policies and procedures for debt, financial administration, and contingency plans for unexpected events.
"Debt policies provide a framework for capital project approval, and the type, structure, and duration of funding instruments that can be employed," Zachem and Daly said.
