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Airport in the black but high costs to carriers worry bond raters


Increases in carrier landing fees and parking charges have helped Jackson’s Municipal Airport Authority regain its financial footing after the June 2014 departure of Southwest Airlines.

The airline accounted for 27 percent of Jackson-Evers’ passenger count.

For the last two fiscal years, the Airport Authority has reported $3.8 million in revenues over expenses. That positive revenue picture comes despite an $800,000-a-year budget hole created by the exit of Southwest.

The brighter fiscal picture has not been enough for Fitch Rating Service to restore an A- bond rating the Airport Authority lost with Southwest’s departure. Further, Fitch is warning the Authority’s BBB+ rating with stable outlook could be in jeopardy if the airport does not cut its costs per passenger.

Fitch said in its April 2015 report it does not see a positive rating bump ahead. “Given the airport’s present enplanement size and service characteristics, positive rating action is unlikely,” Fitch said.

The rating applies to about $38 million in outstanding bonds. The downgrade has led the Airport Authority to indefinitely postpone $88 million in bonds for what was once a five-year capital improvement plan. The bulk of the borrowed money was to go for upgrades to the terminal concourse and security checkpoints.

» READ MORE: Fight for control of Jackson airport set for takeoff

The Authority, however, refinanced $25 million of its debt last fiscal year through Jackson’s Trustmark National Bank for a savings in debt costs of $3.7 million.

In an Aug. 27 2015 assessment, Moody’s Investor Service awarded the Airport Authority’s debt a Baa1 rating with a stable outlook. Moody’s assigns ratings from Aaa to C, with Aaa being the highest quality and C the lowest quality. The Baa1 rating denotes “high ability to repay short-term debt.”

Fitch, meanwhile, kept the Authority’s downgrade in place in its April 2015 report.

“The rating reflects a small enplanement base and operational performance vulnerable to carrier decisions,” Fitch said.

The rating agency attributed the fiscal stability to the various fee increases, but noted the Authority maintains a conservative capital program and debt profile coupled with adequate liquidity and reserves.

As a consequence of a 15 percent increase in landing fees in fiscal 2014, Fitch projected cost-per-enplanement levels in the $11-$12 range, an above average amount compared to similarly sized airports.

Moody’s also noted concern with the above-normal passenger costs borne by Jackson-Evers’ carriers American, Delta and United. “Airline cost per enplanement is above the median for a Baa1 Moody’s rated airport,” the ratings agency said, and noted Jackson-Evers had enplanement costs as low as $9.15 in fiscal 2012 and $10.58 in fiscal 2014.

With increasing per-passenger costs in mind, Fitch’s 2015 analysis projected a continued enplanement loss of 5 percent.

Looking at July 2014 through June 2015, enplanements dropped 12.5 percent, but the remaining carriers have increased flight frequency by 15 percent, according to Fitch.

Fitch’s 2015 analysis projected a continued enplanement loss of 5 percent.

Delta Airlines’ share of passengers grew from about 33.5 percent in fiscal 2013 to 45 percent for the past 12 months, Moody’s said in its August report.

American Airlines – US Airways gained an additional 10 percent share of the passenger business after the loss of Southwest, while United gained a 4 percent share.

Fitch projected enplanements of just above 510,000 for the April 2015-April 2016 forecast period and predicted costs-per-enplanement would stay in the $12 to $13 range. “Prolonged performance at these metrics, however, would ultimately lead to negative ratings action,” Fitch warned.

Likewise, Moody’s said continued losses in passenger traffic related to airlines’ service reductions could nudge the Airport Authority’s rating downward, as could decreases in debt coverage levels.

Also, a drop in liquidity levels below 300 days cash-on-hand could bring a decline in the rating, Moody’s said. However, the Authority’s approximately $15.7 million in unrestricted cash and operating reserves at the end of fiscal 2014 gave it the equivalent to 406 days cash in hand, according to Fitch.

Looking to offset the loss of revenue from Southwest’s exist, the Authority’s fiscal 2014 budget increased parking rates by 50 cents a day for all but the long-term lot.

The Authority also charged carriers 28 cents more per 1,000 pounds in landing fees, with the rate going from $2.71 to $2.99. As recently as 2013, while Southwest Airlines was still among the airport’s carriers, landing fees totaled $1.99 per 1,000 pounds.

Consecutive increases in January and April of 2014 brought those landing fees to $2.35 by April 30.


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About Ted Carter