Moody’s Investors Service downgraded Portland Airport Enterprise’s general airport revenue bonds to Baa1 from A3.

The rating change affects $125.8 million of debt for Maine’s busiest airport. Moody’s outlook is stable.

Moody’s analyst Jennifer Chang identified four challenges for the airport in explaining the downgrade.

She noted that the airport has had four straight years of enplanement decline and a 1.4% decline for fiscal year 2013 as of January. Airport management, however, expects stabilization of enplanement by June.

Further, Chang expects narrowing financial margins and lower debt service coverage in the medium term.

Coverages and financial margins, which had been expected to be 1.29 times for fiscal year 2013 on a net revenue basis, are now expected to be lower, Chang wrote.

Finally, competition from Boston Logan International Airport and Manchester Airport in New Hampshire is pressuring the Portland airport, Chang wrote.

On the plus side, Chang pointed out that the Portland area is the primary economic driver of Maine.

The increased efficiencies from a recently completed terminal expansion project will benefit the airport, Chang wrote.

While Southwest is phasing out its AirTran brand, which serves Portland, it has confirmed Southwest planes will replace AirTran planes in April.

Moody’s stable outlook reflects an expectation of stabilizing enplanement trends and improved liquidity and coverage ratios.  

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