DALLAS -- Southwest Airlines' newfound freedom to begin serving long-haul destinations from Dallas Love Field Airport in October poses risks for smaller cities left behind, Fitch Ratings warned.
Airports in Jackson, Miss., Albuquerque, N.M., and El Paso, Texas, are losing some or all Southwest service as the carrier gears up for Oct. 13, when it will be allowed to fly to any U.S. destination from Dallas Love.
Under the so-called Wright Amendment designed to protect Dallas-Fort Worth International Airport from competition at Love Field, carriers were allowed to fly full-size passenger jets only to cities in Texas and nearby states. That restriction is lifted under an agreement between the cities of Dallas and Fort Worth and the competing carriers in October.
With the end of restrictions, Southwest, which has 16 of Love Field's 20 gates, is dropping some of its former destinations as it allocates aircraft for service from Dallas to big markets like Los Angeles, Washington, New York, Chicago, Denver and Fort Lauderdale, Fla.
Fitch downgraded El Paso's $20 million airport revenue bonds to A from A-plus on May 16, citing multi-year traffic declines.
Southwest made up 52% of El Paso International Airport's fiscal 2013 enplanements. Traffic in fiscal 2013 declined by 5.5% and fiscal 2014 is on track to decline by at least another 5%, analysts said. Traffic is now 19% below its 2007 peak.
"However, El Paso International Airport's very low debt level and strong liquidity position could allow it to ride out short-term weakness in operational performance and a reduction in Southwest traffic could be partially turned around," Fitch analyst Seth Lehman noted.
The pending loss of Southwest's service prompted Fitch Ratings to lower its ratings on the Jackson Municipal Airport Authority's $40 million of outstanding debt to BBB-plus from A-minus on April 3.
Moody's Investors Service downgraded the Jackson airport debt to Baa1 from A3 on May 14. Southwest has accounted for about 24% of passenger service at Jackson-Evers International Airport.
Southwest announced in December that it would cease serving Jackson after June 7.
Fitch affirmed its A-plus rating on Albuquerque's Sunport in 2013, but cautioned about the coming realignment by Southwest.
The Albuquerque airport's enplanements declined at a rate of 2.8% between fiscal years 2007 to 2012.
Southwest said this month that it was dropping 11 of its 45 flights from Albuquerque starting in November, including discontinuation of service to Seattle.
"We believe additional alignments of this kind will continue as Southwest maintains capacity controls across its fleet and stays on course with its ongoing integration of recently acquired AirTran airlines," Lehman said.
Since its 2011 acquisition of AirTran, Southwest has been integrating operations from AirTran's hub at Atlanta Hartsfield International Airport and preparing for its first international flights to Latin American destinations.
At Houston Hobby Airport, Southwest is building a new terminal for international flights. In Dallas, Southwest is financing the $500 million remodeling of Love Field scheduled for completion in October.
Dallas-Fort Worth International Airport is financing a $2.3 billion remodeling of its four original terminals. That project is nearing its halfway point.
American Airlines, the dominant carrier at DFW, was required to surrender its two gates at Love Field and slots at New York LaGuardia Airport and Washington Reagan National Airport as a condition of its merger with US Airways.