Shaken by the tremors of 11 September, it is uncertain how firm a foundation airports have on which to base their financial houses. For instance, rating agency Standard & Poor's recently took the unprecedented step of putting 70 airports on its CreditWatch. Meanwhile, the two other major bond-rating services, Fitch and Moody's, are or have reviewed all of their airport issues.
Although Moody's changed its overall rating outlook on the airport industry from "negative" to "stable" two weeks after the attacks, Fitch was still working on its reviews. A downgrade suggesting less credit-worthiness would raise an airport's cost of borrowing and make completing some projects untenable.
Fitch, which has about $42 billion in debt rated for 64 airports including most of the largest, stresses that airports with a large percentage of connecting traffic and a weak hub carrier are of particular concern. Airports in the strongest position are origin and destination (O&D) airports because the agreements used to recover costs usually come from a potentially more mixed pool of airlines.
Accordingly, Chicago Midway's bond ratings were affirmed at "A" because of its high proportion of O&D traffic. Southwest Airlines, its main carrier, operated a full schedule after the attacks, and number two tenant American Trans Air cut only 15% of its schedule and plans proceed with a capital project at the airport.
By contrast, Chicago's O'Hare may be more vulnerable, with both Fitch and Moody's downgrading the ratings on billions of bonds because of its reliance on the two carriers hit hardest by the terrorists: American and United Airlines.
Meanwhile, the airport from which two of the attacks were launched has taken the hardest hit. Because Massport - the state body that operates Boston's Logan - is being accused of lax security, the potential for legal liability and of falling passenger confidence has become a material concern.
As a consequence, Massport plans to cut almost 40% ($280 million) from its 2002 and 2003 capital budgets, halting renovation of several critical projects. A new runway - long a top priority - is on hold, with a decision on whether to proceed not likely before January. These suspensions are painful for Massport, but it had little choice: according to Dan Champeau of Fitch, if the projects had not been put on hold, the authority would have seriously damaged its bond ratings.
At Logan, passenger traffic dropped by 43% in September from the year before, pulling down traffic for the first nine months of the year by 7.1%. Logan also took the deepest political hit, undergoing a cleansweep of top officers including the unceremonious firing of its security chief, a former state trooper named Joseph Lawless. That was followed by the resignation six weeks after the attacks of Massport executive director Virginia Buckingham. She had gained prominence in the coalition to overcome environmental and other objections and move on building infrastructure. Widely respected, Buckingham, aged 36, had replaced a predecessor mired in Boston political controversy.
Source: Airline Business
