Dwindling passenger traffic at Bradley International Airport is putting near-term financial pressure on the airport’s ability to borrow to refinance debt and fund future improvements, a New York debt-rating agency says.
Fitch Ratings’ assessment is part of the agency’s affirmation of its “A” rating on Bradley’s approximately $199 million in outstanding bonds. However, Fitch lowered its ratings outlook for the Bradley debt to “negative” from “stable.”
The debt is secured with a pledge of the airport’s net revenue from passenger, airline and parking fees, gate leases, and rent from the various retail tenants in Bradley’s two remaining terminals.
The ratings outlook comes as Bradley plans in 2011 to refinance $171 million in outstanding 2001A bonds that, if they can attract a lower interest rate, would cut the cost of the airport’s annual debt service.
Investors rely on debt and credit ratings from Fitch, Standard & Poor’s and Moody’s in determining whether to buy — and at what yield — an issuer’s bonds and other debt instruments.
Bradley also is underway with a $107 million capital improvement program, the linchpin of which is construction of a new Terminal B to replace the half-century-old Murphy Terminal.
As positives, Fitch singled out Bradley’s economically stable trade area served by a diverse mix of air carriers, its strong cash reserves, and annual debt service that is due to decline after 2013.
On the downside, the agency said Bradley’s continued drop in business and leisure travelers since 2006, largely the result of higher ticket prices and its competition with major and regional airports in Boston, Providence and New York state, are behind its dimmed credit outlook.
The state transportation department, Bradley’s operator, expressed “disappointment” at Fitch’s lowered outlook.
“We feel the longer-term outlook for Bradley is improving,” said transportation spokesman Judd Everhart, citing JetBlue’s plan to begin service to Florida this fall, and other carriers’ plans to expand flight schedules.
Bradley’s passenger count is down 10.4 percent in the first nine months of fiscal 2010 from the same period a year earlier, Fitch said.
Despite lower maintenance costs and savings from a hiring freeze, declining air travel still managed to cut Bradley’s operating margin to 23 percent in fiscal 2009 from the 25 percent to 35 percent margin it enjoyed the previous five years, Fitch said.
Delta Air Lines is Bradley’s leading air carrier, with a 23 percent market share, followed by Southwest with 21 percent, and Northwest, United, and US Air at 10 percent each, Fitch said.
