DALLAS - Standard & Poor’s Friday downgraded Colorado Springs Airport revenue bonds to BBB-plus from A-minus, citing falling traffic and growing competition from Denver International Airport 70 miles to the north.
"The downgrade reflects our view of the airport's weakened competitive position, highlighted most recently by the departure of Frontier Airlines and subsequent loss in traffic," said Standard & Poor's credit analyst Anita Pancholy.
After the departure of Frontier Airlines, year-to-date traffic through July is down 17%, analysts reported.
Although pledged revenues have fallen to 1.14 times debt service, S&P called the coverage “adequate,” assigning a stable outlook.
“We could take a negative rating action if operating performance, namely debt service coverage, continues to trend negatively in the next 12-18 months,” Pancholy wrote. “We do not expect to raise the rating during the two-year outlook period, given fluctuating traffic trends.”
Enplanements have declined at an average annual rate of 4.7% since fiscal 2009, although fiscal 2012 traffic increased by slightly less than 1% to 822,000, S&P reported.
Following Denver-based Frontier's departure in April, enplanements have fallen 17.0%.
Like many airports, Colorado Springs’ traffic had declined due to airline capacity consolidation, weaker economic conditions, and rising fuel prices before 2011, Pancholy noted.
US Airways Inc., operating as Mesa Air Group, discontinued service at the airport in January 2010. Frontier and Southwest Airlines increased service at Denver.
“It is unlikely traffic will return to fiscal 2012 levels in the medium term, in our opinion,” Pancholy predicted.
Moody’s Investors Service lowered its rating on the airport’s revenue bonds to Baa1 from A3 on Feb. 26. The outlook was revised to stable from negative.
Fitch Ratings affirmed its BBB-plus rating on June 27 and maintained its stable outlook.
With $39.8 million outstanding, Colorado Springs revenue bonds mature in 2023. Current debt service is flat at $5.2 million to $5.4 million through 2021, according to Fitch Ratings, and then decreases to $1 million through 2023.
The city plans to pay down the series 2002A bonds which represent $30.4 million, from $18 million of cash reserves and a $12.8 million loan from the state infrastructure bank. Payments of the loan are expected to be on parity with existing bonds. Debt service payments are expected to be reduced by 25% to $3.9 million annually, according to Fitch.