Charlotte Douglas bond rating affirmed, risks of airline concentration noted

Credit rating agency Moody’s affirmed its Aa3 rating on Charlotte Douglas International Airport’s bonds, but said the airport’s extreme concentration of flights by American Airlines and the uncertainty over who will run the airport are risks.

Moody’s also affirmed its A3 rating on the car rental facility bonds, and said Charlotte Douglas’ outlook is stable. Among the airport’s pluses, Moody’s said, is its low cost of $1.15 per passenger – the lowest of a major hub airport.

The airport is in the midst of a five-year, $1.5 billion renovation and expansion program that includes everything from new hourly and valet parking decks to a new entrance road and concourse with more gates. The bonds being used to pay for the expansion are funded with airport revenues and rental car facility charges.

“(Moody’s) acknowledges the financial strength of Charlotte Douglas and management’s commitment to cost competitiveness while providing value to passengers and business partners,” Interim Aviation Director Brent Cagle said in a statement.

But the credit rating agency noted that, with more than 90 percent of flights operated by American Airlines, Charlotte Douglas faces an elevated risk of cutbacks by one carrier. Also, 80 percent of the airport’s passengers are connecting from one flight to another, not starting or finishing their trips in Charlotte.

That leaves Charlotte Douglas “vulnerable to connecting traffic volatility,” Moody’s said. But the rating agency also said the airport’s low-cost structure means it could “withstand a substantial loss of connecting traffic and remain on solid financial footing.”

Moody’s also highlighted the ongoing confusion about whether the Charlotte City Council or a new, independent regional authority will run Charlotte Douglas in the future. It’s been almost a year since the N.C. General Assembly created the commission, but it and the city are still tied up in a lawsuit with no resolution in sight.

“Continuing uncertainty around corporate governance issues risks diverting management attention away from operations,” Moody’s said. But the rating agency said it rated the risk of serious damage due to the governance uncertainty as “low.”

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