[S]OUTH BURLINGTON — A credit rating agency says it has seen improvement in the finances at Burlington International Airport but not enough to make its outstanding bonds a more secure investment.
The credit rating firm Fitch Ratings has affirmed its rating of BBB- for the airport’s $40.6 million in revenue bonds issued by its owner, the city of Burlington, according to Business Wire.
BBB- is the lowest Fitch rating of an asset that can still be considered investment grade, meaning it’s regarded as carrying minimal risk for investors. The airport in South Burlington has adequate resources to meet its financial obligations, but “adverse business or economic conditions are more likely to impair this capacity,” according to the rating agency.
Gene Richards, director of aviation for the airport, said he believes Fitch and other credit rating agencies are taking a conservative approach after being hammered in the wake of the 2008 financial collapse for rosy ratings in the banking industry.
“I would have hoped for a sooner uptick,” Richards said, “but I don’t think they’re going to be making any quick jumps.”
Another rating agency, Moody’s Investors Service, had rated the airport’s debt as “junk bond” status until 2014, when it gave the airport its lowest investment-grade rating of Baa3 — raising officials’ hopes for a similar upgrade from the other agency. Fitch had rated the airport as investment grade over the last five years despite a 2012 downgrade from BBB to the current BBB-.
Fitch cites stagnant or declining traffic through the airport as a weakness that could hurt revenues and therefore its ability to service the debt. In fiscal year 2015 the airport, known as BTV, saw 600,402 enplanements — a measure of the total number of paying customers who board a plane at an airport. That’s down roughly 20 percent from a high of 743,000 in fiscal year 2009. The rating agency says “growth was essentially flat” in fiscal year 2016, which ended June 30.
Part of the challenge for the airport is that 19 percent of its travelers are Canadians who drive down for lower fares to U.S. destinations. Those numbers decrease when the exchange rate favors the U.S. dollar, which is currently the case.
“Material changes to passenger traffic levels, some of which are currently influenced by Canadian-based travellers, may pressure the rating,” Fitch states in its rating update.
Richards acknowledged that revenues are closely tied to the stream of Canadian passengers but said he’s confident that traffic will return as the Canadian dollar rebounds.
“Nobody would have expected what it did,” Richards said. “When it returns we’ll have the amenities and the ability to support (the increased traffic).”
Fitch praised the airport’s improved financial practices, noting that revenues are up and expenses are down. The operation has gone from having only one day’s cash on hand in fiscal year 2010 to 176 days’ cash on hand in fiscal year 2015.
If traffic through the airport increases and it’s able to boost cash reserves, Fitch said, it could see its rating increased next time. Richards, who described himself as an optimist when it comes to his airport, said he believes BTV is likely to do both.
“We work hard every day to improve our financial condition here at the airport,” he said. “You’re going to have to earn (a credit rating increase), and that’s what we’re in the midst of doing.”
