BRADENTON, Fla. - Moody's Investors Service downgraded the Jackson Municipal Airport Authority Airport to Baa1 from A3 ahead of the imminent withdrawal of Southwest Airlines from the Mississippi capital's airport.
Southwest has accounted for about 24% of passenger service at Jackson-Evers International Airport.
The lower rating affects about $40 million of debt. The outlook is stable, Moody's said May 14.
"The downgrade to Baa1 reflects expected weakening in the market position of the airport, due to the elimination of service by the airport's second-largest carrier, Southwest Airlines," said analyst Sarah Lee. "The Baa1 rating also incorporates the airport's importance to the regional economy, in addition to its strong debt service coverage, and limited additional debt plans."
Southwest announced in December that it would cease serving Jackson after June 7.
Airport officials, who included information about Southwest's departure in the 2013 audit, said they anticipated remaining carriers to pick up most of Southwest's traffic.
The airport's airline cost per enplanement, which has remained above sector median for the past four years, is now forecasted to rise to $10.49 for fiscal 2014 "making it more expensive for all of the remaining airlines at the airport," Lee said. Fewer passengers will lead to lower concession revenues, which airports use to offset airline costs, so the secondary effect will also drive up airline costs at the airport.
"As a result, the airport will now be more susceptible to flight reductions and will be less likely to see increased service from other airlines," said Lee. "However, the authority has engaged in discussions with the remaining airlines to backfill the loss in service."
Jackson-Evers' largest carrier by enplanements in fiscal 2013 was Delta Air Lines with 33.5% of the market share. The airport is also serviced by American Airlines and its affiliate U.S. Airways, and United Airlines.
The airport authority's financial performance has remained relatively stable, according to Moody's.
In fiscal 2013, the debt service coverage ratio was 2.68 times. Liquidity levels, albeit lower than previous years, are sound at 429 days cash on hand.
The five-year capital plan totals $88 million. Potential borrowings include a $5 million term loan and a $15-to-$20 million bond issuance for a terminal renovation and security checkpoint upgrade project.
The terminal project will be postponed until fiscal 2015, when the authority will have more detailed information on future enplanement activity, Moody's said.
The pending loss of Southwest's service prompted Fitch Ratings to lower its ratings to BBB-plus from A-minus on April 3.