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Houston Airport System
August 6, 2007
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When it comes to promising futures, it seems Houston’s airports definitely have one. At least that's what the nation’s top credit rating institutions are saying after having reviewed the Houston Airport System’s (HAS) current economic standing.
According to three reports, released last month, from Standard & Poor’s, Fitch Ratings and Moody’s Investors Service HAS received top-honors for its current financial standing. These three agencies are among a select group of statistical rating organizations that are nationally recognized by the United States’ Securities and Exchange Commission.
In effect, these credit rating organizations evaluate the economic standing of an institution at a specific time and assign it a score based on its financial status at that time, much in the same way that a credit bureau would evaluate an individual’s credit rating. These scores are then used for regulatory purposes and for allowing potential investors to determine the interest rate at which a particular organization would qualify for a debt.
In the case of the Houston Airport System, these scores affect the interest rates at which it can refund or secure bonds for current or upcoming improvement projects at any of its three airports – George Bush Intercontinental, William P. Hobby and Ellington Field.
These projects can include anything from terminal expansions to roadway improvements. Among the projects that have already been developed through at least the partial use of bonds are the new Federal Inspection Services facility at Bush Intercontinental Airport (IAH), runway improvements at Hobby and IAH, the new Central Concourse at Hobby Airport and various other improvements at all three airports.
Currently, the airport system has a total of $2.2 billion in outstanding subordinate lien airport revenue bonds. These include up to $395 million in airport system subordinate lien revenue refunding bonds that are currently being sold.
For these outstanding bonds the airport system received an A+ from Standard & Poor’s and Fitch Ratings; and an A1 from Moody’s Investors Service. Based on these scores, the airport system would now potentially qualify for lower interest rates on its current or future bonds, taking into account the current market rates available at the specific time that a debt is incurred. |
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© Houston Airport System
Flying high. All three or the Houston Airport System's airports scored high marks for their financial accountability, according to reports released last month by three different independent credit rating institutions. |
Reasons identified by these rating organizations for the Houston Airport System’s high-marks include the city’s strong origin and destination market (O&D), its firm historical financial performance, and its dynamic enplanement growth trends.
Moody’s specifically cites the airport system’s enplanement growth of 6.6 percent through fiscal year 2006, and its current year-to-date increase of 4 percent through the month of May of fiscal year 2007.
The agency’s report reads: “Economic growth in the area has been above average due to the performance of the energy industry which is concentrated here. While this growth is moderating, Moody’s believes it will not reverse course anytime soon. Economic strength is not confined to the energy sector as the area has also seen strong trends in all sectors, particularly manufacturing and trade. The healthy economic and population trends in the Houston area should continue to bolster airport system O&D enplanements.”
Fitch Ratings based its assessment on the “broad economic base of the primary service area, as well as the system’s sound financial operations, strong historical demand for air carrier service, and modest future debt needs.”
Last year, more than 51 million passengers traveled through Houston’s airports. By 2020, that number is expected to increase by 57 percent, to 80 million travelers per year.
Rick Vacar, HAS director, says the latest ratings are a continuation of the airport system’s long-standing positive economic performances.
“We have always grown according to the demands of our passengers,” he adds. “Fortunately, Houston is not only a strong connecting point for the rest of the world – it is also a very active O&D market. This allows us to continue growing and attracts new air carriers to our city.”
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