WASHINGTON — The outlook for bond-financed transportation infrastructure remains stable, but could possibly see a downturn if the slow economic recovery loses momentum or if banks are downgraded. according to a new mid-year report from Fitch Ratings.
The report assigns a stable to negative outlook to the transportation sector as a whole, with airports also receiving a stable-negative designation.
Toll roads and ports both earned a stable rating. The outlooks have improved since 2010, when airports were negative and ports and toll roads were stable-negative.
“At present, 11% of the rated securities have a negative outlook,” the report states. “Barring event risk not captured by Fitch’s downside scenarios, the U.S. portfolio is not likely to see widespread negative rating action for the remainder of 2012.”
Airports, which had the most guarded outlook, are still slowly improving, according to the report.
“Traffic performance continued to move in a modestly positive direction during early 2012, although the pace of recovery is still tepid due to a combination of economic factors in the U.S. and abroad that collectively affect demand,” it said.
Large airports or airports serving as hubs for major carriers are outperforming small airports within driving distance of bigger ones, according to Fitch. Despite that, analysts remain cautious about three of the largest U.S. airports.
“The three domestic hub airports at Chicago O’Hare, Miami, and Dallas-Fort Worth remain on negative outlook as the American Airlines bankruptcy runs its course, and consolidation with another major carrier is still uncertain,” Fitch said.
The port outlook is largely dictated by the volume of shipping moving in and out of the facilities, and the report delivers a mixed message.
Ports have seen steady volume growth since December 2011, and may get a boost heading into the back-to-school and holiday seasons. However, those volumes could also drop thanks to the strengthening of U.S. manufacturing.
“U.S. industrial production has grown more rapidly in recent months,” Fitch said. “If this trend continues in the longer term, port import volumes may decrease as domestic products replace previously imported items.”
Toll roads remain resilient and stable as well, but political push-back against necessary future toll hikes could result in less revenue than expected, Fitch analysts wrote.
North Carolina Reps. G.K. Butterfield, a Democrat, and Renee Ellmers, a Republican, have sponsored legislation that would restrict tolling in some areas.
Sen. Frank Lautenberg, D-N.J., has a bill that would give the federal government more oversight over tolling.
Although Fitch views further negative action this year as unlikely, it pointed to concern over an apparently stagnating economic recovery.
“Growth in the U.S. appears to be slowing and remains vulnerable to further weakening as a result of the eurozone debt crisis and potential budget cuts at the federal level scheduled for 2013,” the report states. “A 5% reduction in volume at U.S. airports and on toll roads could cause Fitch to reevaluate the outlook.”
Bank downgrades and a liquidity shortage could also dim the outlook, according to Fitch.
