An improved financial picture at Hollywood Burbank Airport led Fitch Ratings to revise its outlook to stable from negative despite uncertainty around a terminal expansion project.
Fitch concurrently affirmed an A rating on the Los Angeles-area airport's $83.2 million in revenue bonds.
A combination of improving passenger volumes and financial relief from federal aid helped mitigate pandemic-related stress that has challenged the airport since March 2020, Fitch analysts wrote.
“Operating revenues from quickly recovering enplanement levels coupled with federal relief funds are expected to be sufficient to cover the airport’s debt service requirements over the next few years,” Fitch analysts said. “Traffic improvement is outpacing peers, and generating metrics consistent with current rating levels.”
Traffic declined by nearly 70% in fiscal 2021, but has since recovered to 82% of pre-pandemic levels, though the airport has experienced traffic fluctuations in recent months due to surges in coronavirus variants, Fitch analysts wrote.
S&P downgraded the airport’s ratings to A from A-plus in October 2020 and assigned a negative outlook, but a year later revised the outlook to stable at the lower rating. Moody’s affirmed an A2 rating in March 2020 and assigned a stable outlook.
The airport postponed a $1 billion project to replace its existing passenger terminal, which is expected to result in the issuance of $700 million to $900 million in debt, amid the pandemic, Fitch analysts said.
But the project has resumed and is in the pre-construction development phase with the airport in the process of procuring a progressive design-build contract.
The project shifts the previous focus on capital plan spending from maintenance-related projects to replacement of the passenger terminal.
The ratings reflect the airport’s relatively small, predominantly origination-destination traffic base, Fitch wrote.
The airport, which faces strong competition from Los Angeles International Airport, experienced strong enplanement growth from 2015 through early 2020, and recovery from the pandemic has been strong, Fitch analysts wrote.
