US Airports May Face Financial Pressure

April 5, 2012

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US airports may not get all the federal funding promised in a new capital improvements package and some airports will face financial pressures that could yield credit-ratings cuts, Standard & Poor's said on Thursday.

President Obama in February signed a Federal Aviation Administration bill approving USD$3.35 billion in annual airport improvements funds for the fiscal years to 2015.

But that was USD$165 million a year less than a previous programme and the bill did not authorise increases in airport passenger fees that airport operators had sought, according to S&P.

"And with Washington seeking to cut the national debt, trim the federal budget, and reduce appropriations, the actual funding levels may be even lower than those authorised currently," S&P said in a new report.

Airports need to build and improve facilities to meeting rising demand and may have to turn to the US municipal bond market or other lenders to make up for any shortfalls in federal funds.

"The obvious choices to fund urgent capital projects are to approach the debt markets or draw on available liquidity," the report said. "Either option could become a rating factor, especially if new debt or reduced liquidity results in a financial risk profile that is no longer consistent with the existing credit rating."

The credit ratings group said the airport issuers it tracks are all investment grade and are deeply affected by the overall performance of the US economy. Any ratings reductions would likely be one notch, S&P said.

From 2009 to 2011, S&P lowered ratings on 17 general airport revenue bonds and raised ratings on nine. Between 2006 and 2008, before the recession, S&P raised ratings on 27 airport revenue bond issues and cut its rating on just one.