Fitch Ratings has upgraded the rating on the Port Authority of New York and New Jersey JFK International Air Terminal's (IAT or the terminal) approximately $1.4 billion parity special project bonds series 6 and series 8 to 'BBB+' from 'BBB'. The Rating Outlook has been revised to Stable from Positive.
RATING RATIONALE
The upgrade reflects the strong performance of the terminal post-completion of its Phase II expansion project, which added 11 regional jet gates and relocated additional domestic activity for Delta Airlines' (Delta; 'BBB-'/Stable Outlook) to Terminal 4. Traffic increases have bolstered IAT's net position, leaving the terminal with a strong debt service coverage ratio (DSCR) of 2.12x and more rapid deleveraging compared to original expectations. Cost per enplanement (CPE) levels remain slightly higher than peer terminals, however capacity constraints and the resulting economic value to airlines serving the region mitigates this concern.
The rating reflects IAT's strategic significance to foreign-flag carriers and to Delta as the hub for its operations in the New York area. IAT's long-term airline agreement with Delta is contracted through the rated debt's maturity and provides IAT with adequate cost and debt service recovery terms. Despite the significant investment Delta has made into the terminal, the single asset nature of IAT as well as its heavy reliance on one dominant carrier present material credit risks that keep the credit in the 'BBB' category. IAT also faces on-going competition for domestic and international traffic from other terminals at JFK, Newark Liberty International Airport (EWR), and LaGuardia (LGA) airports.
