Hartsfield Development Bonds Garner A+ Rating

ATLANTA-Hartsfield Atlanta International Airport, the world’s largest passenger airport with 77 million passengers served in 2002, has received an A+ rating on its estimated $580 million bond issues. They will be used to pay for $6.4 billion in new development, marking the largest capital expansion in the airport’s 23-year history.

Area brokers say the airport’s expansion has drawn numerous multi-million-dollar local, regional and national commercial and industrial real estate projects to the airport site, as developers hope to cash in on Hartsfield’s dominance in an airline industry currently under financial duress.

That’s also the finding of New York-based Standard & Poor’s Ratings Services. “The historically strong overseas and domestic market, an efficient hubbing operation, limited competing alternatives and low airline costs continue to support an above-average passenger demand profile at the airport, despite a sluggish local economy,” says S&P analyst Reid Tomlin.

“The key challenge in the medium term will be management’s ability to preserve its industry leading cost structure during the extensive capital expansion, while, at the same time, attracting further passenger growth in the medium to long term,” Tomlin says.

The S&P rating is on the general airport revenue bonds, series RF-A through series RF-F. The bonds will be funding the construction of Hartsfield’s fifth runway and other new airport construction.

Hartsfield’s design allows it “a surprisingly large number of passengers to and from its system, despite having only four runways, keeping per passenger costs among the lowest in the nation,” the analyst says.

Because of that factor, Hartsfield’s dominant market share position “has driven high passenger yields and is likely also a primary factor in the airport’s positive passenger recovery levels in the past 15 months, despite the decline industry wide,” Tomlin says.

But the sluggish local economy has also contributed to “a slower recovery” in overseas and domestic traffic, which was down by about 7% in 2002. “A costly and operationally challenging $6.4 billion capital expansion will position the airport to handle long-term growth, but also will place upward pressure on airline rates it charges until a more consistent recovery trend is evident.”