Dallas Fort Worth International Airport is gearing up to enter the municipal bond market with a $750 million deal, following an impressive rating upgrade from S&P Global Ratings. The upgrade from AA-minus to A-plus is a result of the airport’s robust enplanements, financial resiliency, and stable debt service coverage. This positive change in rating indicates a promising future for the airport’s financial performance, driven by a manageable capital plan and a favorable outlook for the forecast period of 2025-2029. However, it is crucial to remain cautious as this upgrade comes with the expectation of sustained financial performance, which may face challenges in the future.
DFW’s ambitious capital improvement program involves the construction of a sixth terminal and expansions of terminals A and C, with a projected cost of $8.6 billion through fiscal 2029. While the airport has successfully pre-approved $5.1 billion of the program with airlines, there are significant pricing and execution risks that need to be carefully monitored. The outstanding debt of $7.224 billion is expected to increase to $12.4 billion by fiscal 2029, highlighting the potential financial burden that could impact the airport’s creditworthiness in the long run.
Despite the challenges posed by the COVID-19 pandemic, DFW has shown resilience in its passenger volume, surpassing pre-pandemic levels with 79.7 million passengers in fiscal 2023. The airport forecasts a steady growth trajectory, with a projected 92.7 million passengers in fiscal 2025, reaching 107.1 million in fiscal 2029. This optimistic outlook is supported by strong passenger growth, primarily driven by American Airlines, the dominant carrier at DFW. While this growth is promising, there is a need for cautious optimism as external factors such as economic conditions and travel trends could impact passenger traffic in the future.
The upcoming bond sale will involve the refunding of about $450 million of outstanding extendable commercial paper and the issuance of approximately $300 million of new bonds. The debt is rated A-plus by Fitch Ratings and AA by Kroll Bond Rating Agency, with stable outlooks. Despite these favorable ratings, it is essential to acknowledge the risks associated with future debt issuances and the potential impact on the airport’s overall financial health. The management’s efforts to de-risk the construction program and maintain above-average liquidity are commendable, but ongoing vigilance is necessary to navigate potential challenges in the evolving market landscape.
While Dallas Fort Worth International Airport’s $750 million municipal bond deal and rating upgrade represent significant milestones in the airport’s financial journey, it is imperative to approach these developments with a critical lens. The capital improvement program, passenger growth forecasts, debt issuances, and associated risks all play a crucial role in shaping the airport’s long-term financial sustainability. By carefully evaluating these factors and addressing potential challenges proactively, DFW can continue on a path of growth and resilience in the competitive aviation industry.