Fitch Ratings has warned that the outlook for US airports in 2012 is “murkier” than most other transportation sectors and has predicted that growth will “be stagnant at best for 2012.”
In its 2012 outlook for US Transportation Infrastructure, Fitch Ratings has forecast that the airport sector in the US faces “another year of slow growth” as airline consolidation and bankruptcy filings continue to restrain capacity.
The ratings agency said that its research indicates that aircraft movements at US airports over the next 12 months could range from a growth of 5% to declines of 0.8%, but added that the potential for this growth was “unlikely”.
It said: “Previous research published by Fitch coupled with the agency’s expectations for GDP and unemployment for 2012 indicate that enplanements at US airports could range from growth of 5.0% to declines of 0.8%, although the upward bound is viewed as unlikely given industry consolidation and restructuring.”
As a result Fitch has given US airports a “stable-to-negative” outlook for 2012, the same as it was for 2011, reflecting the view that mildly positive traffic performance over the past two years may experience renewed stresses in the coming year.
In particular the rating agency cited the restructuring of American Airlines and ongoing mergers between other large carriers, which “could push volume to the lower end of the range”.
It said: “The recent Chapter 11 bankruptcy filing of American Airlines, the third-largest US flag carrier, has the potential to result in operational changes during the bankruptcy process.
“Fitch believes that both small market airports and certain hubs with measurable concentration risk, particularly the three key domestic hubs in Dallas-Fort Worth, Miami, and Chicago (all on Rating Outlook Negative) have a heightened risk profile during the restructuring process.”
Meanwhile, in light of a “substantial rise in debt” by US airports over the past five years, Fitch said that revenue management would be a key rating driver for a large number of airports over the next year.
It said that given both the current economic climate and the continued capped rate of the passenger facility charge (PFC), airports will be under pressure to either leverage existing revenue streams further, such as terminal concessions or parking, or create new revenue sources.
Without capitalising on these resources Fitch said that: “airports that operate with both rising debt service costs and tepid traffic performance could be facing more financial pressure”.
For the time being, the median credit quality of the airport sector in the US still remains in the ‘A’ category, however, Fitch warned that to date, “negative rating actions have significantly outpaced the positive actions”.
In 2011, Fitch downgraded seven airports including Chicago O’Hare, Metropolitan Washington Airports Authority, Cleveland, and Borward County.
It added that over the year, key drivers for rating or outlook actions have been “related to traffic performance and volatility, leveraging, or weakening coverage and other financial metrics”.