The Houston City Council last week approved a lease agreement between William P. Hobby Airport and Southwest Airlines, clearing a path for Southwest’s first international flights.

Hobby is the smaller of Houston’s two airports. 

United Airlines operates from George Bush Intercontinental Airport. Both airports are undergoing bond-financed renovations.

Over the next two years, Houston’s airport authority and Dallas-based Southwest Airlines plan to add a parking garage and concourse, expand Hobby’s terminal and make roadway modifications to serve international flights. The project is expected to cost about $150 million, according to Southwest.

The Hobby expansion would be paid for through a $1.50 surcharge on each Hobby passenger.

The fee is also levied on passengers carried by American, Delta, and JetBlue airlines, which serve the airport near downtown. Southwest accounts for nearly 90% of the traffic at Hobby.

The Houston Airport System, which issues debt for projects at both airports, carries ratings of A from Standard & Poor’s, Aa3 from Moody’s Investors Service and A-plus from Fitch Ratings. 

Fitch has a negative outlook on the debt, while the Standard & Poor’s and Moody’s outlooks are stable.

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