Posted on: Tuesday, December 7, 2004
Debt-saddled airlines owe nation's airports millions
By Gary Stoller
USA Today
Big airlines now in bankruptcy protection have run up tens of millions of dollars in debt to the nation's airports.
But, aviation finance experts say, airports as a group have pulled through the industry's worst downturn in far better shape than the airlines.
Initial court petitions of three airlines now operating in bankruptcy protection — United Airlines, US Airways and ATA Airlines — showed airports among their top creditors. They're owed more than $51 million in unsecured debt, mostly for landing fees and space rental.
Henry Efroymson, a lawyer for the Indianapolis airport, says United owes his client about $10 million as part of a bigger debt to governments in Indiana in connection with a maintenance facility. United declined comment.
But despite a big financial hit following Sept. 11 and the continuing inability of some airlines to make payments, airports have encountered "significantly less instability," says Fitch Ratings, a company that rates airport bonds.
Unlike airlines, airports have limited competition and multiple revenue sources: bond proceeds for capital improvements, government aid and fees from passengers and airport concessionaires. Also, their leases allow them to transfer operating costs and debts to their other airline tenants.
Fitch recently analyzed financial data for 59 airports since mid-1999 and gave them all good to excellent credit ratings. Even Pittsburgh International, San Francisco International and other airports with a large percentage of United and US Airways flights "maintain adequate financial margins" and remain current on debt payments, says Fitch's Corey Modeste.
That doesn't mean the airline industry's financial decline hasn't had an impact. Most airports have seen a decline in operating revenues and profits since Sept. 11. Many have cut operating expenses and deferred improvements.
Stephen Van Beek of the trade group Airports Council International-North America says airports were hit after Sept. 11 with increased security costs as well as a drop in passengers. Fewer flights meant reduced revenue from landing fees and concessions. The federal government reimbursed some security costs, and airports raised fees for airlines, rental-car companies and other tenants, he says.
Van Beek says airports also found ways to reduce costs. Many refinanced debt to take advantage of prevailing low interest rates.
"Generally speaking, airports are in sound financial shape," Van Beek says.
