Airports Will Have To Tap Debt Markets To Pay For Expansion, Fitch Says

The major U.S. airports will have to issue more debt to finance their expansion plans and meet increasing travel demand, according to Fitch Ratings in a report released on Wednesday.

The rating agency estimates that the combined debt burden of a sample of 13 airports will rise by 78% between 2019 and 2027.

The good news is that airports are expected to increase revenue to compensate for the higher indebtedness. Due to this, Fitch states that it does not anticipate pressure on their credit.

"Additional debt, combined with the general inflationary pressures facing airports, will cause the cost per passenger enplanement at large hubs to continue to rise," says Fitch's Senior Director Seth Lehman in the report. "Operating revenues from airlines/non-aeronautical sources, along with other airport revenues, should be able to keep pace with the higher financial obligations to service debt."

Passenger traffic at the main hubs has returned to pre-pandemic levels, and airports are moving forward with their capital expenditure plans. Although the federal government will finance some of that spending, Fitch noted that most of the costs will need to be covered by tapping debt markets.

By 2027, large-hub airports are forecasted to have passenger traffic 10% above the levels of 2019, the year before the Covid pandemic, according to the report.

Some of them, such as the airports in Miami and Dallas, are already above pre-pandemic levels due to their leisure demand or their status as major airline hubs. Others, including Los Angeles and San Francisco, are lagging because international traffic between the U.S. and Asia has not returned to 2019 levels, according to Fitch.