S & P Rating Services Issues Annual Colorado Springs Airport Credit Rating
Tuesday, September 17, 2013
Standard & Poor's Ratings Services issued its annual credit update for the Colorado Springs Airport’s (COS) outstanding bonds on September 13, 2013. The rating was revised from A- with a stable outlook to BBB+ with a stable outlook. S&P cited a downward enplanement trend at COS, particularly after the departure of Frontier Airlines during the second quarter of 2013; the airport’s proximity to Denver International Airport; and a lower calculated debt service ratio as factors that informed S&P’s decision.
However, S&P also noted that the downgrade reflects the agency’s overall position regarding small hub, origin and destination airports, which have altogether faced decreased capacity as a result of airline capacity consolidation and weaker economic conditions. S&P added that it does not anticipate recovery across this sector in the near-term, further supporting its determination. Although Airport officials agree with the reality of decreased airline capacity, the Airport countered S&P’s statement with the following facts:
- Despite the loss of Frontier, COS’ incumbent airlines have been able to recapture some of Frontier’s traffic, as reflected by higher passenger levels on remaining flights.
- Airport officials continue to have positive discussions with existing carriers about recapturing lost markets.
- Alaska Airlines has identified growth potential in COS and will begin daily, non-stop flights in November 2013.
- Finally, the Colorado Springs Airport has faced competition from lower-than-average fares because of three competing, hubbing air carriers at Denver International Airport.
Despite S&P’s downgrade, the Airport remains on course to decrease costs and create a healthier, more attractive operating environment for airlines. The Airport still intends to significantly reduce annual debt service payments in the near term by paying down and refinancing one of its bonds; it is anticipated this strategy will reduce annual payments by 25%. According to City's financial advisor, Public Financial Management, Inc., "The Airport's plan of finance is a balanced approach to reducing costs through utilizing both cash to reduce debt and refinancing outstanding bonds at lower interest rates. Additionally, the Airport is seeking a low interest loan from the State Infrastructure Bank, which will further support the Airport's stated goal of reducing costs to the airlines while efficiently financing the capital plan at below market rates."
At the same time, Airport staff continues to seek opportunities to diversify the enterprise’s revenue stream, including reinvesting in terminal space to generate revenue and bolstering businesses in the general aviation district, all of which decrease the cost for an airline to operate from COS. With all these initiatives in place, Colorado Springs Airport officials are confident that a healthier operating environment will result and the community will attract increased air service.