Despite lower passenger rates, Fitch Ratings affirmed the airport’s $39.8 million in revenue bonds at BBB+ and a stable rating.
Fitch noted that the airport had an enplanement base of 822,000, but continues to face ‘strong competition from neighboring Denver International Airport which offers service to more destinations, usually at higher frequencies and lower fares.”
Traffic at the Colorado Springs airport increased by 0.9 percent in 2012, after experiencing four consecutive years of traffic decreases that resulted in an aggregate decline of 20 percent. Fitch also said the airport would see an 18.6 percent decrease in passengers during 2013, thanks to Frontier Airlines’ recent decision to leave the Springs market.
However, the rating service said that airport management plans to stabilize rates and charges to airlines through a combination of cost reductions, and to use reserves to lower debt service payments. Currently, the airport’s cost per passenger is high for a small-hub airport at $7.58.
“Management currently anticipates paying down the series 2002A bonds, which represent $30.4 million of $29.8 million bonds outstanding from $18 million cash reserves and a $12.8 million loan from the state infrastructure bank,” Fitch said. “Debt service payments are expected to be reduced by 25 percent to $3.9 million annually.”
Fitch said the airport’s liquidity is robust, with $32.8 million of unrestricted cash equivalent to 837 days of cash on hand.
“The airport is expected to have over 500 days cash on hand following the repayment of series 2002A bonds,” Fitch said.
There are still concerns, however.
Fitch noted that the airport’s stable rating could be in danger if the airport officials fail to execute the debt reduction plan, if there were further service reductions from existing carriers, if coverage levels dipped or if the airport had a “significant erosion” in its liquidity balances.
And Fitch continued rumors that the airport is courting new service – beyond the recently announced Alaska Airlines daily flight to Seattle.
“Some lost service could be restored in 2014, with two airlines finalizing plans to resume service to two previously served markets,” the Fitch report said.
And the ratings company praised airport officials for their actions following Frontier’s departure.
“Staff was reduced to 102 full-time employees from 118 and the parking concessionaire was mandated to reduce their cost structure by 15 percent for 2013,” the report said. “Operating expenses in the revised budget are 8.1 percent lower than the original budget. However budgeted expenses of $14.5 million are slightly higher than the $14.3 million in 2012.”
And Fitch says the airport is likely to see flat or slight growth after this year’s precipitous decline due to Frontier’s departure.
“Under such scenario, CPE might rise to the $10 range from $7.58 in order to maintain coverage,” the report said, “a level that is very high for an airport of its size.”