Long-term financing for a $5.5 billion expansion and development program at Austin-Bergstrom International Airport takes off this week with the Texas capital city's $1.18 billion revenue bond sale.
The debt issuance comes as other Texas airports are teeing up bond offerings this year.
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The bonds, which were rated A1 by Moody's Ratings, A-plus by S&P Global Ratings, and AA-minus by KBRA — all with stable outlooks — are backed by a first lien on the airport system's net revenue.
With the airport bursting at the seams, the city launched "Journey with AUS," aimed at increasing the facility's capacity with projects that include an expanded concourse A, a 26-gate midfield Concourse B, as well as security checkpoint, baggage, utility, airfield, and other improvements. The number of jet bridge-equipped gates will increase to 60 in 2031 from 33 in 2025.
"To be a big international city, we have to bring that airport up to speed, and we are doing it," Austin Mayor Kirk Watson told The Bond Buyer Texas Public Finance Conference on March 31.
An estimated 83% of the $5.5 billion program's cost is expected to be bond financed, with passenger facility charge revenue accounting for 3% and federal grants 4%, according to the bond deal's investor presentation. Future bond issuance totaling $4.17 billion is anticipated over the next four years.
Origin and destination passengers account for about 89% of enplanements, which grew by an average 6.3% annually since 2016 and set a record in 2024 of 11 million, the presentation said. Enplanements are forecast to grow from 11.3 million in fiscal 2026 to 16.7 million by fiscal 2033, while airline and non-airline revenue is projected to grow during that same timeframe from nearly $432 million to $982 million with debt service coverage peaking at 3.13 times before sliding to 1.66 times.
Multi-year
Airlines also committed to leasing new gates with Southwest Airlines, the airport's biggest carrier, going from 10 to 18, while Delta Airlines will expand from four to 15, and American Airlines will grow from four to nine, it added.
Moody's said its rating and outlook incorporates the airport's "strong market position," as well as proactive steps by management "to mitigate the risks of additional leverage through a strong agreement with airlines and that the local Austin economy will support the high costs to airlines that will result from the sizable capital plan." It also said "the credit profile remains sensitive to construction execution, cost escalation, and demand performance through its peak capital period."
S&P said its stable outlook "reflects our expectation that AUS will experience steady air travel demand and that management will adjust revenues, expenses and capital spending as needed to maintain healthy financial metrics consistent with its projections as significant debt is issued to support a large capital program."
Borrowing for the capital program will increase debt metrics to a level that is exceptionally high for the AA-minus rating level, according to KBRA, adding it views the program "as a generational investment necessary to meet the needs of the Austin MSA's rapidly growing economy."
"Moreover, upon completion of (the program), the airport's terminal infrastructure will be entirely brand-new or extensively renovated and provide sufficient capacity to meet projected air travel demand," KBRA's rating report said. "Capital needs beyond (the program) appear to be limited, allowing for gradual moderation in leverage over time."
The new midfield concourse will require demolition of the airport's South Terminal, a privately operated terminal for low-cost carriers that
The city
Outstanding airport-related subordinate notes totaling $60 million as of Sept. 30 that mature on May 29 will be refinanced using long-term debt, according to the POS. The city last
The deal is led by senior manager Jefferies and co-senior manager JP Morgan with Hilltop Securities, Loop Capital Market, and Stifel as co-managers. Frasca & Associates is the municipal advisor and Bracewell is bond counsel.
Dallas Fort Worth International Airport is lining up approvals to sell up to $3 billion of bonds this year for its $12 billion DFW Forward capital program with the Dallas City Council greenlighting the issuance last week.
DFW's March 31 presentation to the Fort Worth City Council, which is expected to vote on the bonds at its April 28 meeting, showed plans to sell $1.5 billion to $2 billion of AMT bonds and $500 million to $1 billion of non-AMT bonds in September.
"Over the next four years, we're looking to borrow up to $9 billion of debt, which sounds like a lot of money, but when you consider kind of the two major projects that we're doing, which is the central terminal area expansion, it's just it's around $3 billion, and then obviously the brand new Terminal F, which will be a 31-gate terminal that will be all American Airlines that will have both domestic and international capabilities," DFW Chief Financial Officer Brian Butler told the city council.
Hilltop Securities and Estrada Hinojosa are the financial advisors and McCall Parkhurst & Horton and West & Associates are bond counsel, and the airport is working to put together an underwriting team, Russell Selkirk, DFW's vice president of treasury management, said during the presentation.
Last year's $1.967 million bond issue marked the airport's biggest one-day debt sale with the deal netting
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