When Lee County, Florida, sold $217.67 million of airport revenue bonds last week, the deal carried a new positive rating outlook.
Kroll Bond Rating Agency revised its outlook on the Southwest Florida International Airport's bonds to positive from stable on Sept. 8 while affirming its A-plus rating on the revenue bonds.
Proceeds from last week’s deal provided new money for the Fort Myers airport’s capital improvement program. It was the second bond sale of the year by the county for the airport — July's sale was a refunding for savings.
The airport is owned by the county and operated by the Lee County Port Authority. Kroll said outlook revision reflected the “extremely strong recovery” in enplanement levels realized at the airport through July.
“In KBRA’s opinion, such enplanement levels may be early indicators of a sustained, longer term strengthening of demand for air travel within the airport’s air trade area,” Kroll said in its report.
On Oct. 7, BofA Securities priced Lee County’s $217.67 million of Series 2021B airport revenue bonds subject to the alternative minimum tax. The deal was priced to yield from 0.33% with a 5% coupon in 2023 to 2.35% with a 4% coupon in 2041. A 2046 term bond was priced as 5s to yield 2.35% and a 2051 term was priced as 4s to yield 2.58%.
On June 18, BofA priced the county’s $139.56 million of Series 2021A airport revenue refunding bonds, subject to the AMT. The deal was priced with 5% coupons to yield from 0.30% in 2023 to 1.54% in 2032.
The two sales also carried ratings of A2 from Moody’s Investors Service and A from Fitch Ratings. Both agencies assign stable outlooks; Fitch lifted its outlook from negative in June.
“The stable outlook reflects the significant passenger recovery at SWFIA to approximately 98% of pre-pandemic levels as of April 2021, supported by Fort Myers status as an attractive leisure destination under less restrictive lockdown policies, coupled with management's demonstrated conservative financial and capital management throughout the coronavirus pandemic,” Fitch said.
“The comment in KBRA’s rating report was meant to suggest that the profile of the airport was enhanced during the pandemic, resulting in an elevation in passenger traffic levels to a new baseline. In our view, this was due to the air-trade area, which includes Fort Myers, Naples, and Sanibel Island, finally being seen as a beach market ‘equal’ to long-established Florida leisure markets like FLL [Fort Lauderdale-Hollywood International Airport], MIA [Miami International Airport] and others,” Douglas Kilcommons and Harvey Zachem, Kroll managing directors, told The Bond Buyer.
“A significant concentration of high paying, financial service sector jobs in Naples, along with Northeast and Midwest residents moving their primary residence or establishing a secondary residence, also contributed to the strengthening demand that KBRA does not see going away. Airline scheduling and routing decisions well into the spring of 2022 speak to this,” they said.
The airport’s five-year capital improvement plan has increased to $604 million to include an approximate $332 million terminal expansion project as well as pavement and runway rehabilitation, Kroll said. Funding will come from cash on hand, federal and state grants, pay go funding along with bond issuance.
"All projects are demand-driven and could be scaled back or deferred if enplanement growth slows due to ongoing issues with the coronavirus pandemic," Kroll said.
The airport was awarded $37 million in CARES Act coronavirus relief grants, of which about $20 million has been used to offset the authority’s operating expenses and debt service in fiscal 2020 and fiscal 2021. The remaining $17 million is expected to be used during fiscal year 2021 and 2022 to offset current expenses and debt service. The airport was also allocated $43 million more in two subsequent rounds of federal coronavirus relief.
“The recovery at SWFIA remains anchored by strong leisure travel demand to Florida, and specifically the air trade area, which includes the cities of Naples and Fort Myers; improving vaccination rates; and a strengthening regional economy," Kroll said. "While a significant rise in COVID cases in Florida casts some uncertainty around future travel demand, management notes that airlines are continuing to add capacity and increase frequency throughout the Fall and have not postponed or canceled the introduction of any recently announced air service."
Fitch was also positive about the county itself and its finances. In July, it affirmed the county's $188.5 million in outstanding tourist development tax revenue bonds and the county's issuer default rating at AA and revised the outlook on both to positive from stable.
Since 2011, the county has sold about $1.25 billion of bonds, with the most issuance occurring this year.
Moody's said its rating on the airport bonds “reflects the fundamental strength of the origin and destination market in Lee County, which has been supported by a growing population base and improvements in the local area economy.”
It noted that the Fort Myers airport saw sustained enplanement growth during the years leading up to the pandemic but experienced a severe contraction at the outset of the pandemic.
However, it “has since been among the fastest U.S. airports to recover due to its exposure to domestic leisure and travel related demand,” Moody’s said.
Since 2011, issuers in Florida have sold about $14.36 billion of bonds for airports around the state, with the most issuance occurring in 2019 when they sold over $3.23 billion of debt.
Things have started to look up for airports in Florida and around the country in 2021.
In July, Fitch issued a report detailing the revisions to the forward-looking U.S. air traffic assumptions due to the strong rebound in domestic air travel driven by increased U.S. vaccinations and a surge in U.S. leisure air traffic.
International air traffic is expected to climb in November after vaccinated non-U.S. citizens from at 39 previously restricted countries, including the United Kingdom and European Union nations, are allowed to enter the country for the first time since 2020.
So far this year, Miami International Airport has been the busiest U.S. airport for international passengers, according to Miami-Dade County. Of the 22.8 million passengers seen in August, 7.7 million were traveling internationally.
While domestic travel at MIA is down only 5% this year compared to 2019, international travel is down 50%.
“Our tourism industry and local economy can now enter a new and exciting chapter in our recovery from the pandemic,” Miami-Dade County Mayor Daniella Levine Cava said last week. “International travel at MIA is growing again toward pre-pandemic levels. This will mean more visitors to our local businesses and more job creation, which is fantastic news.”
In the next several months, American Airlines will be adding two new international destinations and six new domestic routes. Spirit Airlines has made its debut at MIA and Frontier Airlines will launch nine new nonstop routes.
Orlando International Airport saw over 4 million passengers in July, pushing the total number of passengers so far this year past 2020's levels.
The state's busiest airport reported last month that the total number of passengers for all of 2020 was 21,617,803. With July's numbers added in, Orlando already has seen 22,052,110 passengers in the first seven months of 2021.
Orlando airport also broke a previous record for the number of domestic travelers with 3.9 million in July, a 4.4% increase over the previous July record set in 2019. However, the lack of foreign visitors has caused international traffic to fall about 70% from July 2019 pre-pandemic levels.
Kroll said it will continue to monitor the direct and indirect impacts of the COVID-19 virus.
“Regarding Florida airports more broadly, the combination of what is perceived as an economically ‘open’ state, which is home to a very strong leisure/hospitality sector, and favorable business climate, is driving a recovery in passenger traffic at most Florida airports that is outpacing the U.S. average,” Kilcommons and Zachem said.
“Importantly, however, KBRA recognizes that the fluid, often unpredictable nature of the virus, including the potential for still unknown variants to emerge, may complicate a full recovery in enplanements to pre-pandemic levels-even at Florida-over the near term. Longer-term, uncertainty remains regarding future hybrid/remote working arrangements and the impact on business meeting and conference travel,” they said.
