Refunding deal will clear path for next phase of DFW airport expansion

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Dallas-Fort Worth International Airport is preparing for a $1.3 billion revenue bond refunding this summer as it plans the next phase of its redevelopment.

The DFW board of directors approved a resolution on May 2 asking the two owner cities of Dallas and Fort Worth to authorize a maximum of $1.3 billion of fixed-rate joint revenue refunding bonds to be designated as 2019A bonds, the airport’s first issue this year.


The negotiated deal is expected to price the week of Aug. 5 through JP Morgan Securities as book-runner and Citigroup, Inc. and Bank of America Merrill Lynch as co-senior managers. Ramirez and Co. and Siebert Cisneros Shanks & Co. are co-managers.

Pledged revenues include rentals, fees and charges collected from the airlines and from non-airline sources, such as parking and concessions.

After handling a record 69 million customers in 2018 and further growth this year, DFW is expanding its showcase international Terminal D as it consults with its largest airline tenant, American Airlines, on plans for a new Terminal F.

DFW Airport Board approved $4.8 million on Dec. 6 for pre-construction related services for addition of four new gates for Terminal D. The funding will provide for a construction manager who will design and plan for the initial phase. Construction is expected to begin this year and last up to two years, with the first passengers in 2021 expected to use the added gates at the International Terminal in 2021.

“We’ve seen tremendous growth in international traffic in the last several years, and it remains a priority for DFW,” said Khaled Naja, executive vice president of infrastructure and design. “By expanding Terminal D, we’re positioning the Airport for future opportunities and better service for our customers and airline partners.”

Planners expect more than 72 million people to fly through DFW terminals in 2019. The expansion is estimated to be nearly 150,000 square feet on three levels, and will connect to the southeast corner of the DFW Terminal D. The project is supported by the airlines at DFW and will provide up to four gates, serving both international and domestic flights, accommodating aircraft ranging from four narrow-body Airbus A321s that seat up to 220 people to two widebody Boeing 777-300s that can seat up to 368 people.

As the airport approaches its 45th anniversary, officials are in the process of replacing the original runways.

One of its seven runways reopened in March after a $133 million resurfacing of more than 13,000 feet of pavement with high-tech, weather-resistant asphalt. It was the first asphalt runway and the first to be resurfaced since the airport opened in 1974.

“The team endured one of the rainiest periods in DFW history and has upgraded our airfield to better serve our customers safely and efficiently for decades to come,” Naja said.

The resurfaced Runway 17C/35C handles about 40% of arrivals into DFW. The special asphalt mixture can withstand temperatures up to 190 degrees Fahrenheit. The special mix is approved by the FAA and officials said it underwent rigorous quality controls during the construction process, with testing conducted at every 2,000 tons during production.

“DFW took every step possible to reduce the construction time and return the air traffic patterns to normal as quickly as possible,” said Chad Makovsky, executive vice president of operations.

The runway includes enhanced LED lighting and pavement markings. The project was funded through $80 million in FAA grants.

The airport marked another milestone in January with the start of the 27-mile commuter rail line linking DFW to downtown Fort Worth at Terminal B. The TexRail line operates at Terminal B and completes rail connections between the two cities that own the airport. Dallas Area Rapid Transit opened its 37-mile light-rail connection from downtown Dallas to DFW in 2014.

DFW spent $39 million and took 19 months to complete the rail station. From Terminal B, riders can connect to other terminals via the automated Terminal Link or Skylink.

TEXRail operates seven days a week, with trains running every 30 minutes during peak hours. Trinity Metro is a regional transportation system in Tarrant County. The agency shares operations with DART on another 34-mile commuter rail line with a station at the airport’s south entrance. That line connects downtown Dallas and Fort Worth.

DFW has not issued bonds since a $302.4 million joint revenue improvement series in December 2017.

Those bonds were rated A-plus by S&P Global Ratings with a stable outlook. Fitch Ratings upgraded its rating from A to A-plus one year ago.

“DFW is nearly complete with its nearly $1.9 billion terminal renewal and improvement program (TRIP) and is transitioning to a recently developed $3.4 billion 10-year capital plan focusing on airfield and other infrastructure redevelopment,” Fitch analysts wrote in a May 2018 report. “Funding for this program includes future borrowings for 60% of the total program costs. Over the longer term, DFW will still need additional investments for its terminal facilities, a process still under negotiation with its leading carriers, in order to sustain its strong position as modern hub facility.”

Kroll Bond Rating Agency rates DFW’s revenue bonds AA-minus with a stable outlook.

The airport previously sold $583 million in parity joint improvement revenue bonds in 2016 and 2017 through private placements. Airport officials have said they plan to sell all future bonds as taxable issues, bypassing the alternative minimum tax market for airport debt.

DFW’s future issues for the airfield and new terminal will compete with billions of dollars of bonds coming from airports across the country. To market their bonds, airport officials plan to target foreign investors, along with those in the U.S. that typically buy corporate bonds.

DFW has about $6.7 billion in principal outstanding with a final maturity of Nov. 1, 2050. All airport debt is fixed-rate with no derivative exposure.

In the process of renovating its four original terminals, the airport deferred $800 million of work on Terminal C as American Airlines considered the option of building a new Terminal F.

On May 3, American added 15 gates to Terminal E, allowing 100 more daily flights on its American Eagle affiliate. DFW is American’s most profitable hub.


Beginning next month, American will operate more than 900 daily flights from DFW. That’s 100 more than last summer, including service to 23 new markets.

American is also partnering on the $1.2 billion expansion of international Terminal 5 at its other major hub of Chicago O’Hare International Airport. That project, which began in March, is part of O’Hare’s $8.5 billion capital project.

At DFW, American is considering a more efficient shape for parking aircraft at the new Terminal F and the possibility of not building a car parking garage at all. About a fourth of car traffic at the airport comes from ride-share services such as Lyft and Uber.

To compete with the ride-hailing services, DFW launched a pre-paid parking program with deep discounts. Travelers who buy prepaid parking by May 31 can save 20% on travel through the end of the year.

The system, which allows customers to book parking in advance, saved customers $8.8 million in its first year, officials said.

DFW estimates debt under the current capital program will rise to about $7 billion.

“This will significantly increase overall debt to about $213 per enplaned passenger, from $135 in 2011, and raises airlines' cost per enplaned passenger to approximately $14.22 in 2018 from $7.20 in 2013,” S&P noted in 2017. “Although we already view DFW's debt per enplaned passenger as high, we consider it manageable.”

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Airport revenue bonds AMT Taxable bonds Transportation industry Dallas Fort Worth International Airport Board Texas
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