Fitch Ratings has affirmed the Colorado Springs Airport outstanding $6.8 million revenue bonds at BBB+. Fitch does not rate the airport’s approximately $9.4 million in senior revenue refunding bonds issued in 2014. The Rating Outlook has been revised to Stable from Negative.
The Outlook revision to Stable reflects early signs of traffic stabilization, a solid five-year commitment from airlines under a new a hybrid airline use and lease agreement (which is projected to reduce cost per enplanement), and progressive deleveraging with the 2007 series bonds expected to be defeased in December 2016, while preserving a healthy liquidity position.
The BBB+ rating reflects the airport’s small regional traffic profile with a protracted history of enplanement contraction, offset by strong liquidity, low leverage and stable financial metrics with coverage over 1.6x debt service coverage ratio in fiscal 2015.
The airport services a small origination and destination traffic base of just more than 600,000 annual enplanements. It is exposed to strong competition from neighboring Denver International Airport, which is served by similar carriers and offers service to more destinations. United Airlines, which hubs at DIA, has high, (approximately 50 percent), carrier concentration at COS. Following a 21-percent decrease in traffic due to Frontier discontinuing service in 2013, traffic has further contracted by an aggregate 9 percent; however, this trend appears to be reversing with year-to-date traffic up 5 percent over 2015.
The airport’s 10-year capital improvement program, which totals $156 million, is primarily focused on airport repair and rehabilitation.
Current annual debt service payments are flat at $2.6 million, but are expected to reduce to $1.4 million through maturity, as the airport is expected to utilize its cash reserves to defease the 2007 series bonds in December, when the bonds become callable.