Federal stimulus for airports will help stabilize budgets

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As U.S. airports bleed cash because of drastically reduced flights and measures to cut costs amid the COVID-19 pandemic, analysts say the CARES Act will help mitigate the loss of revenues and help pay debt service.

The Coronavirus Aid, Relief and Economic Stimulus Act, signed into law by President Donald Trump Friday, provides that $10 billion be allocated to U.S. public airports. Of that, $7.4 billion can be used for any lawful purpose, including the payment of debt service.

Delta Air Lines planes parked in California's high desert because of a lack of passenger demand. Airports are getting some help in the $2 trillion CARES Act to cushion the blow from lost revenue.

The assistance for airports is unprecedented for the sector and will help to stabilize airport budgets, according to Seth Lehman and Jeffrey Lack, directors in Fitch Ratings' division of global infrastructure and project finance.

"The funds, which are provided in response to the coronavirus pandemic and can be applied broadly by airports for any lawful airport purpose, are intended to provide near-term bridge funding for lost revenues until enplanements can meaningfully return to pre-crisis levels," the analysts said.

"Fitch expects airports to take varying courses of action with this assistance, ranging from rate relief to air carriers and concession tenants to directly offsetting operating costs and upcoming debt payments," they added.

On March 18, Orlando International Airport authorities reported experiencing a 36% year-over-year decrease in passengers since an expanded federal international travel ban became effective and travelers cancelled flights to Florida's busiest airport because of the highly contagious virus.

While OIA is undergoing a $4.12 billion largely bond-financed capital program, Greater Orlando Aviation Authority Executive Director Phillip Brown said the airport had 324 days of operating cash on hand.

"In these kinds of environments that can evaporate very quickly,” said Brown, who was among airport directors across the country who requested $10 billion in the third round of federal government support in the wake of the coronavirus health crisis and economic fallout.

The CARES Act also includes $25 billion of grant funding to passenger airlines to pay worker salaries and an additional $25 billion of loan guarantees that provide cash relief to airlines, according to senior analyst Earl Heffintrayer with Moody's Investors Service.

"Support for airlines will help lessen the stress for airports because airlines will be able to free up more resources to pay increased airport costs," he said.

The $7.4 billion that can be used for any legal purposes will be dispersed to airports using a formula that allocates 50% based on the total number of enplanements in calendar year 2018 and 50% based on an equal combination of the airport's fiscal 2018 debt service and the ratio of the airport's unrestricted reserves to debt service requirements, Moody's said.

Moody’s estimates that the largest grant will go to the Port Authority of New York and New Jersey, which operates the region’s public airports. The authority could get as much as $437.2 million, or 15% of the authority’s fiscal 2018 operating revenue and passenger facility charge collections, which are considered capital contributions.

Chicago’s O’Hare Airport could get $333.2 million, or 27% of 2018 operating revenues and PFCs.

Hartsfield-Jackson Atlanta International Airport could receive the third-highest grant of $274.5 million, or 38% of revenues and PFCs.

Of the $10 billion allocated to airports, the remaining $2.6 billion will be used to increase airport construction grant funding, Moody’s said.

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Coronavirus Airport revenue bonds Infrastructure Port Authority of New York & New Jersey O'Hare Airport City of Atlanta, GA Washington DC Greater Orlando Aviation Authority