St. Louis this week released an addendum to the preliminary offering statement on an upcoming $230 million revenue bond sale for Lambert-St. Louis International Airport that includes an updated financial feasibility study following American Airlines’ announcement that it plans to cut 18 daily flights.
Fitch Ratings released a report on Friday announcing that it would monitor the effect of the cuts on passenger levels. Analysts noted, however, that the potential for additional traffic losses was factored into its negative outlook assigned to the credit in its review of the deal released earlier this month. Fitch downgraded the Lambert credit to BBB at the time and assigned a negative outlook.
American Airlines — the lead carrier at the airport — and its regional carrier, American Eagle, announced the elimination of at least 18 daily flights effective between August and November.
The cuts affect flights to 12 markets and include the elimination of service to San Diego, Las Vegas, and Philadelphia.
Fitch believes that given the capacity reductions at other airlines, St. Louis will face a tough time finding carriers to step up in the near term to take over American’s gates.
The revised airport consultant financial feasibility released in the addendum incorporates American’s actions. Under the most severe stress-case scenario, Lambert faces traffic losses averaging 280,000 annually, or 4%.
To reduce the impact of the cuts on its balance sheet, the airport will raise parking rates in fiscal 2010, a year earlier than previously planned; implement a hiring freeze and a purchasing freeze on nonessential items, and require all expenses be reviewed by the chief financial officer.
The Lambert issue includes up to $230 million that will provide $126 million of new money for projects. The rest will be refunding bonds through a tender option designed to take advantage of the relief provided by the federal stimulus from the alternative minimum tax.
Standard & Poor’s raised the credit to A-minus from BBB-plus and assigned a stable outlook. Moody’s Investors Service revised the outlook for its Baa1 rating to negative from stable.
Goldman, Sachs & Co. and Stifel Nicolaus & Co. are the senior managers.
