CHICAGO — Fitch Ratings downgraded Cleveland's airport after its main carrier, United Airlines, announced it was dropping the airport as a hub.
The city, which owns the Cleveland-Hopkins International Airport, called the Feb. 5 downgrade an "aggressive action" and defended the airport's finances as strong. City and state officials have scrambled to address United's decision, which will mean deep cuts in flights.
Cleveland Mayor Frank Jackson held a press conference Feb. 3, saying the cuts would not be devastating and would allow the airport to explore other areas for growth.
Gov. John Kasich said the state would ask United to reconsider.
"Hopefully this situation can be reversed over time and we're going to continue to work with United to try to eventually do that," Kasich said, according to the Associated Press.
Fitch downgraded the airport's $787 million of outstanding airport revenue bonds to BBB-plus from A-minus. The outlook remains negative, even at the lower rating, the firm said. The airport also has $58 million of bonds placed directly with U.S. Bank NA in 2013 that are not rated by Fitch.
United's cuts could lead to the airport losing as much as a third of current traffic, according to Fitch.
"The downgrade to BBB-plus reflects elevated concerns over the airport's long-term financial flexibility and cost competitiveness in light of the recent announcement by its leading carrier, United Continental Holdings, to significantly reduce its flight operations over the coming months," Fitch analyst Daniel Adelman wrote in the downgrade report. "The cuts in flights and markets will be fully phased in by June 2014 and will likely lead to measurable and potentially permanent declines in the airport's current 4.5 million enplanement base."
United will cut back its daily departures by 64% — dropping to 72 flights from 200 — and reduce 66% of its non-stop markets served from the airport. That will lead to a "near elimination" of its connecting service and 11% cut in its origin-and-departure service, Fitch said.
The cuts will mean higher cost-per-enplanement to maintain stable debt-service coverage, the ratings firm said.
Cleveland officials said they were surprised by Fitch's action as the ratings firm indicated earlier in the week that it would take a "wait and see approach," according to a press release put out by Jackson's office.
"Certainly the immediacy of this aggressive action and the subsequent immediate announcement from Fitch allows the city no time to examine or question the validity of the basis of the assumptions used for the downgrade," the statement said. "The city of Cleveland is confident in [the airport's] ability to meet its financial obligations, recover from United's decision and successfully compete for new air service with other airlines."
The city noted that Fitch praised the airport for its conservative debt structure and strong liquidity. "This financial strength, combined with the airport's strategic investments over the past eight years, its aggressive air service marketing campaign, along with strong origin-and-destination service, will create new growth opportunities," the city said.
