DALLAS - Increases in airline passengers from an improved U.S. economy has pushed the outlook for the airport sector to positive from stable for the first time since early 2013, Moody's Investors Service said in a report.
Airlines flying larger airplanes with more seats will fuel 3% to 4% growth in passenger loads in 2014 with a similar increase expected in 2015, said Earl Heffintrayer, an assistant vice president at Moody's and lead analyst for the airport sector report.
Analysts had expected a passenger load increase of 2% in 2014, he said.
The unexpected growth in passengers and the resulting stronger-than-expected financial performance will provide airports with more debt service coverage and a financial cushion against downside risks, he said.
The increase in the numbers of passengers who board flights in an airport, or enplanements, is a key factor in the improved outlook for the airport sector, Heffintrayer said.
"In most instances it translates into higher parking and airport terminal concession revenues," he said. "Enplanement growth is strongly correlated with airline seat capacity and economic growth. "Parking and terminal concessions accounted for 49% of total airport revenues in fiscal 2013, according to the Federal Aviation Administration.
Airlines have been concentrating on increasing their service at airports serving larger, more profitable markets at the expense of those in small- and medium-sized markets but enplanements are becoming more balanced across the size range, Heffintrayer said.
"We expect to see positive enplanement growth trends across the industry and not just in one category of airport, although large hubs will continue to perform best," he said.
Traffic growth began gaining steam in summer and the trend continued into September, he said.
Total enplanements have risen by 3% or more from 2013 in every month since April, he said.
Passenger growth exceeded 2% at 55 of 90 airports for which data were available, Heffintrayer said, with 18 airports reporting increases to 2%.
Some large airports posted significant increases in their already healthy passenger totals, Heffintrayer said, including a 9.9% jump at Dallas-Fort Worth International Airport and a 9.4% increase at Atlanta-Hartfield International Airport.
Airports with significant international traffic may see fewer foreign tourists due to the stronger dollar and weaker economies in Europe and Latin America, Heffintrayer said. The slowdown in international arrivals will probably be countered by increased numbers of Americans who will find foreign travel less expensive, he said.
The airlines' shift to larger airplanes with more seats will reduce the pressure on airports for additional runway capacity but will shift the focus of airport capital plans on bigger and better terminals, the Moody's report said.
Terminal improvement projects will continue, it said, including the proposed $3 billion project by the Port Authority of New York and New Jersey to replace the central terminal building at LaGuardia and DFW Airport's $2.7 billion terminal rehabilitation effort.
Moody's raised its outlook for U.S. airports to stable from negative in February 2013. The outlook had been negative since 2008.
