Downgrade in aviation bonds won't affect Miami airport operations
By Frank Norton
Tuesday's downgrading of aviation bonds will not significantly affect Miami International Airport's ability to attract capital and move on its $4.8 billion expansion, a county official said.
"It confirms what troubled us about being in the market at this time with all the unknowns about American Airlines, the war in Iraq and now SARS," said Steven Baker, deputy aviation director. The bond downgrade is "not a major change," he said.
Fitch Ratings on Tuesday downgraded Miami-Dade County's $2.6 billion in outstanding aviation bonds to "A" from "'A+," citing concerns about Miami International's "credit fundamentals."
Factors cited in the downgrading include American Airline's financial difficulties, Miami International's loan obligations and cost structure, economic turmoil in South America and the war in Iraq. All of those are expected to affect the airport's international passenger traffic, which accounts for about half of its total.
Fitch also said a weakened global aviation environment contributed to the downgrade.
Mr. Baker said the downgrading could increase aviation borrowing costs though not significantly.
"It's a difficult time for airports to be in the market for money... but MIA is still the largest international gateway in the US and American Airline's best-performing hub," he said.
He said the relatively weak economy is actually lowering the aviation authority's development costs because many large contractors are bidding lower than they normally would because they need the work.
Mr. Baker said the downgrade will not affect any of the airport's terminal or runway expansions.
The proceeds from the county's $2.6 billion in bonds, scheduled to be priced the week of May 12 to reflect interest rates and risk premiums will be used to refinance outstanding aviation development facilities bonds and pay for a portion of the airport's capital-improvement plan and issuance-related costs.
Aviation officials said American Airline's troubles are not a serious threat to Miami International.
The airport runs on a residual basis - carriers and passengers pay operating costs through landing and other fees. Because American Airlines drives nearly half of that revenue, its struggles cast a shadow over the aviation system's creditworthiness.
But "history has shown that bankruptcy does not change the operating patterns of an airline," Mr. Baker said. "So while we're pleased they have avoided bankruptcy, neither they nor ourselves anticipated a significant change in Miami operations anyway."
Miguel Southwell, assistant director of business development for Miami-Dade's Aviation Department, said there would be at worst a negligible change in borrowing costs.
"We don't expect it to have any impact on our ability to attract financing and," he said, "just as important, to get favorable rates."