"Airports ride out troubles better than airlines"

Monday, December 6, 2004

Airports ride out troubles better than airlines
By Gary Stoller
USA Today


Big airlines now in bankruptcy protection have run up tens of millions of
dollars in debt to the nation's airports. 

But, aviation finance experts say, airports as a group have pulled through
the industry's worst downturn in far better shape than the airlines. 

Initial court petitions of three airlines now operating in bankruptcy
protection -- United Airlines, US Airways and ATA Airlines -- showed
airports among their top creditors. They're owed more than $51 million in
unsecured debt, mostly for landing fees and space rental. 

Henry Efroymson, a lawyer for the Indianapolis airport, says United owes his
client about $10 million as part of a bigger debt to governments in Indiana
in connection with a maintenance facility. United declined comment. 

But despite a big financial hit following Sept. 11 and the continuing
inability of some airlines to make payments, airports have encountered
"significantly less instability," says Fitch Ratings, a company that rates
airport bonds. 

Unlike airlines, airports have limited competition and multiple revenue
sources: bond proceeds for capital improvements, government aid and fees
from passengers and airport concessionaires. Also, their leases allow them
to transfer operating costs and debts to their other airline tenants. 

Fitch recently analyzed financial data for 59 airports since mid- 1999 and
gave them all good to excellent credit ratings. 

Even Pittsburgh International, San Francisco International and other
airports with a large percentage of United and US Airways flights "maintain
adequate financial margins" and remain current on debt payments, says
Fitch's Corey Modeste. 

That doesn't mean the airline industry's financial decline hasn't had an
impact. Most airports have seen a decline in operating revenue and profit
since Sept. 11. Many have cut operating expenses and deferred improvements. 

Stephen Van Beek of trade group Airports Council International- North
America says airports were hit after Sept. 11 with increased security costs
as well as a drop in passengers. Fewer flights meant reduced revenue from
landing fees and concessions. The federal government reimbursed some
security costs, and airports raised fees for airlines, rental-car companies
and other tenants, he says. 

Van Beek says airports also found ways to reduce costs. Many refinanced debt
to take advantage of prevailing low interest rates. 

"Generally speaking, airports are in sound financial shape," Van Beek says. 

What airports are owed 

The initial bankruptcy-court petitions of United Airlines, US Airways and
ATA Airlines included the following amounts of money owed to airports. The
amounts may have changed during subsequent court proceedings. 

United Airlines 

Denver $12.7 million 

San Francisco $7.6 million 

Washington $2.8 million 

US Airways 

Philadelphia $4.1 million 

Charlotte $2.8 million 

New York $1.3 million 

Pittsburgh $1.1 million 

Boston $973,000 

Washington $696,000 

ATA Airlines 

Chicago $7 million 

Orlando $154,000 

Source: U.S. bankruptcy-court filings


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