DALLAS More airline passengers expected in 2014 will support new-money debt issued for airport projects since the end of fiscal 2012, Moody’s Investors Service said Tuesday as it extended the sector’s stable outlook into next year.
Airlines are adding seats, Moody’s said, and more passengers mean more revenues for the airports. Airlines are expected to add 1% to their existing seating capacity in 2014.
"The first quarter of next year will see the first increase in the number of flights in almost three years," said analyst Earl Heffintrayer, a Moody's assistant vice president.
Moody's changed its outlook for U.S. airports to stable in February 2013 after four years in negative territory.
“We expect that growth in enplanements will help mitigate the increased costs to airlines of the debt issued over the past 18 months,” the report said. “Enplanements are important in our analysis because when more people buy airline tickets, more people are likely to spend money at the airport, be it at restaurants, rental-car facilities or parking lots.”
Airports have issued approximately $4.7 billion of new-money debt since the end of fiscal 2012, Moody’s said, with $4.4 billion provided by large hub airports mostly to fund terminal renovation projects.
The large hub airports account for 63% of U.S. enplanements, up from 60% in 2002, according to the U.S. Bureau of Transportation Statistics.
“Large hubs are increasing in importance because they constitute a great portion of enplanements and debt,” Moody’s said.
New-money bond deals will drop in 2014 from 2013 totals, Moody’s said, citing the decision by Dallas-Fort Worth International Airport to accelerate debt sales to take advantage of low rates.
“Based on major capital plans that are in progress, we estimate new money issuance will be around $1.1 billion in 2014,” Moody’s said.
Total debt service at rated airport credits will grow from $5.1 billion in fiscal 2013 to a peak of $5.7 billion in fiscal 2016, the outlook report said.
“Based on scheduled debt service payments, the sector would actually de-leverage over the year, though leverage would remain essentially flat over the next four years,’ Moody’s said.
More debt funding could be needed if government operational funding or grants are reduced.
Debt issued in fiscal 2013 resulted in an increase in debt per customers to $196, Moody’s said, up from $189 in 2012.
A severe but unlikely spike in the price of oil to more than $135 per barrel would probably shift the outlook for the airport sector back to negative, Moody’s said.