Moody's upgrades HAS bond rating
Aug. 19, 2015

In a report released August 5, 2015, Moody's Investors Service upgraded the subordinate lien rating of the Houston Airport System (HAS) to A1 and affirmed the Aa3 senior lien rating and the A2 inferior lien rating.

Moody’s also classified the HAS issuer outlook as stable “based on our expectation that the local economy will continue to see moderated growth, that the system will manage construction in a way that minimizes cost and schedule overruns, and additional leverage will be added in a prudent and measured pace.”

“Both George Bush Intercontinental Airport (IAH) and William P. Hobby Airport (HOU) are poised for continued growth and success,” said Mario C. Diaz, the Director of the Houston Airport System. “Moody’s upgrade is reflective not only of the record passenger numbers at our airports, but also our team’s responsible fiscal management.” 

Both Bush Intercontinental and Hobby Airport saw record highs in passenger numbers in 2014, totaling more than 53 million passengers at HAS airports — the fifth straight year for passenger totals at the two commercial airports.

The upgrade to A1 of the subordinate lien rating was based on “improved clarity on the timing and funding sources for the system's large $2.2 billion capital plan, the recent approval of PFC collection at both IAH and HOU in 2015, and the resilience shown in the local economy through the initial phases of the drop in oil prices.”  The report also cited “modest” leverage levels and “high levels” of liquidity as factors in the upgrade.

The report noted “the dynamic and growing Houston service area” and that both IAH and HOU hold “a prominent position in the respective dominant carriers' network and benefits from long-term airline agreements.” United Airlines is the predominant carrier at IAH, while Southwest is the predominant carrier at HOU.

An increase in international traffic at IAH also played a role in the upgrade. Six new international carriers either launched or announced Houston service at IAH between January 2014 and January 2015. IAH serves as a global gateway to more than 70 international destinations on six continents and offers service to more Mexican destinations than any other U.S. airport. In October 2015, a new international terminal at HOU will open, offering Houston travelers more options to visit destinations in Latin America.

Since the financial crisis in 2008 HAS has focused on minimizing costs while expanding services and products offered. In the five years since 2011, the average growth rate in operations and maintenance expenses has been less than 3 percent, while non-airline revenues — generated by new concessions, enhanced parking options, and other expanded products — have grown at an average rate of more than 6 percent. These favorable financial trends have resulted in stable costs for HAS’s airline partners, even when factoring in the cost of new services to enhance the customer experience like free Wi-Fi and added automated passport control kiosks at both airports.

See the complete report