LOS ANGELES — Moody's Investors Service downgraded Long Beach, Calif. Airport to A3 from A2 Oct. 13.
The outlook is stable at the new, lower rating, affecting $117.5 million in outstanding senior airport enterprise revenue bonds.
The A3 rating reflects the airport's niche position in the economically-diverse Los Angeles metropolitan market, the low cost to airlines and no future new money debt issuance plans, Moody's analysts said.
The downgrade resulted from "continued enplanement losses, driven by JetBlue, causing the airport to underperform compared to passenger projections related to the most recent debt issuance for its terminal renovation," analyst said.
The decline in passenger numbers comes at a time when debt service has begun to amortize, narrowing financial metrics.
The stable outlook is based on analyst expectations that the airport will be able to maintain the current coverage and liquidity levels while keeping enplanements in the range of 1.3 to 1.5 million passengers.
The strengths cited included that the airport is located in a strong, economically diverse service area; the airport's limited future capital needs and lack of plans to issue new debt; and an improved liquidity position that has resulted in the airport hitting the target of having one year of cash on hand.
Among the challenges is significant competition from four other airports in the broader Los Angeles service area including Los Angeles International Airport, which is only 22 miles away.
Other challenges are that it has a high concentration of flights from JetBlue, which has cut service since fiscal 2012; and lacks formal airline agreements presenting greater risk in an environment of declining passenger levels and greater debt service requirements.
The rating could be upgraded if the airport's enplanements come in line with projections by rising above the 1.5 million annual enplanements associated with the most recent debt issuance in 2010.
Further loss of service, particularly from JetBlue, reducing financial margins, increasing airline costs, or reduction of liquidity below one year of cash on hand could place negative pressure on the rating.