US airport sector view is now positive – S&P Global Ratings

S&P Global Ratings has revised its view of the US airport sector, raising its rating to ‘positive’ from ‘stable’ following what it describes as an improving landscape for the aviation industry.

It stated that the sector view revision to positive from stable reflects the resurgence of domestic travel, stabilising airline credit conditions, significant federal assistance, and a rebound in revenue-generating capacity.

“We believe improving economic, health, and aviation industry conditions could accelerate the recovery in US airports’ market positions and enhance credit quality over the next 12 months,” said S&P Global Ratings credit analyst, Kurt Forsgren.

S&P’s airport sector median analysis and the modest degree of credit erosion across the sector highlight the significance of $15 billion-$20 billion in special federal COVID-19 relief grants, which operators used to pay debt service expenses and operating costs while preserving unrestricted cash reserves comparable with pre-pandemic levels.

Separately, the recent passage of the $1.2 trillion Infrastructure Investment and Jobs Act will provide another $25 billion for the airport sector to fund capital projects over the next five years.

The ratings agency’s analysis of 2020 airport medians also revealed the effects of airport management actions taken to limit the financial implications of the precipitous drop in passenger traffic, with median debt service coverage (S&P Global Ratings-calculated) declining to an adequate 1.1x in 2020 from a strong 1.6x in 2019, while median liquidity levels fell by less than 6% to 489 days and median debt outstanding increased 21% to approximately $840 million.