CHICAGO — Fitch Ratings shifted its outlook on O'Hare International Airport's rating to stable from negative, citing steady air traffic trends and more certainty about American Airlines' future at the airport following its exit from bankruptcy.
Fitch affirmed the Chicago-owned airport's senior lien general airport revenue bond rating of A-minus. The action impacts $6.6 billion of bonds. The airport's $664 million of passenger facility charge revenue bonds were affirmed at A and their outlook remained stable.
The airport suffered during the recession, with passenger levels dropping by more than 12% below 2007 levels. Growth has been flat since 2010 although traffic over the first six months of 2014 was up 4.1%.
American emerged from bankruptcy in late 2013 and has completed its merger with US Airways. Neither has resulted in material operational changes at O'Hare.
"The stability of American is important as the carrier, together with United, will be influential to O'Hare's future capital investment and leveraging commitments," Fitch wrote.
The rating agency also considers the airport's favorable progress on its $8 billion capital program, with overall costs in line with forecasts, a positive factor.
O'Hare's GARB credit profile including leverage and coverage levels are weaker than those of large single-A level hub airports, but the rating agency said mitigating factors include the airport's strong local market, the strategic location of Chicago as a hub, and its demonstrated importance to both United Airlines and American Airlines.
United and American both operate hubs at the airport and account for the majority of flights there with United representing 47 % of traffic and American 34%.
Connecting traffic accounts for about half of the total 33.3 million passengers that use the airport annually. About 50 carriers operate out of O'Hare. The PFC bonds are supported by high coverage ratios and lower leverage.
"The revised outlook on the O'Hare bonds is a testament to the economic strength of O'Hare Airport and the prospective for continued fiscal strength and growth of this key Chicago asset," Chicago Mayor Rahm Emanuel said in a statement.
Fitch said over the long term it expects O'Hare to demonstrate resilient traffic performance despite cycles in the economy and aviation sector.
Airline costs per enplanement are moderate for a large-hub airport at $14.15 but are expected to rise above $20 over the next five years and potentially could peak at over $25 later on as airport capital spending is reflected the airline rate base.
The airport has remained within budget for the first, $3.3 billion phase of its ongoing $8 billion capital program that includes a new runway configuration, several additional runways and extensions. The airlines have approved an additional $1 billion of projects but they showed strong resistance to additional projects that total $2 billion. Some terminal projects also remain on hold.
"Fitch will consider the financial plans to support the entire capital program, including the timing and degree of future leverage on either the GARB or PFC credit," analysts wrote.
Standard & Poor's rates the airport's GARBs and stand-alone PFCs A-minus and Moody's Investors Service rates the GARBs' and PFCs A2.
