The Handbook of Municipal Bonds

CHAPTER 50

How to Analyze Airport Revenue Bonds

William E. Oliver Senior Vice President Director, Municipal Research AllianceBernstein

 

Daryl Clements Senior Portfolio Manager AllianceBernstein

 

 

 

Airport revenue bonds have generally been regarded as one of the more stable and secure revenue bond types, due to the essential role that most major airports play in the nation’s air transportation system. Airports are generally operated by municipal governments or public authorities and possess significant flexibility in setting rates and charges at an adequate level to meet all bondholder covenant requirements. They often face limited direct competition within their metropolitan region or have a strong enough economic base to support multiple airports within the same region. In recent years, however, airport operators have faced unprecedented challenges from a variety of sources, including airline bankruptcies, the changing structure of airline routing, the threat of international terrorism, the spreading of contagious diseases around the globe, rising fuel costs and increasing volatility in travel caused by economic fluctuations. While most airport managements have found a way to cope with these difficult challenges, the complacency with which investors once viewed this sector is gone forever.

AIRPORT OWNERSHIP STRUCTURES

Most public airports in the United States and Canada are owned and operated either directly by municipal governments or by local or regional public authorities. ...