Tampa International Airport (TPA) is making headlines with its recent plans to issue $484 million in alternate minimum tax eligible senior bonds. This step, occurring just a week after Fitch Ratings positively adjusted the airport’s subordinate debt rating, marks a significant financial move for the Hillsborough County Aviation Authority. The strategic financial planning reflects TPA’s commitment to infrastructure development and its confidence in steadily growing air traffic demand within the region.
In an encouraging sign of the airport’s finances, Moody’s Ratings has rated the bonds as Aa3, while Fitch rates them at AA-minus and Kroll Bond Rating Agency gives a solid AA rating. The successful upgrade of the subordinate bonds from A-plus to AA-minus in late July demonstrates TPA’s improving creditworthiness, a compelling signal for prospective investors. The stable outlook from these ratings agencies indicates that they foresee continued financial health for TPA, which has positioned itself as an essential travel hub in Florida.
The Series 2024B bonds represent a critical source of financing for TPA’s ambitious development project — the construction of Airside D. This will introduce 16 new swing-gates, anticipating an uptick in passenger capacity as travel demand continues to soar. The total cost for this project is estimated at $1.5 billion, with nearly $896 million expected to come from this bond issuance alone.
Additionally, TPA plans on creating an automatic people mover to connect the new Airside D facility to the main terminal, further enhancing passenger experience. This investment not only showcases the airport’s proactive approach to meeting increasing passenger needs but also preserves its competitive edge in the aviation market.
Multiple experts, including Joseph Krist from Muni Credit News, emphasize the strategic positioning of TPA in relation to major tourist destinations such as Disney World. The introduction of a train connection to Orlando is anticipated to bolster interconnectivity and passenger flow, benefitting both airports in the long run.
Ken Cushine, principal of Frasca & Associates, notes that there has been robust interest in TPA’s bond offering. With insurance companies, banks, and bond funds leading the charge as potential investors, the upgrade from Fitch appears to have piqued investor enthusiasm. This spike in interest signifies a trust in the airport’s future growth trajectory, setting the stage for a successful issuance.
Though TPA bonds have historically underperformed compared to their airport peers, they recently showed a composite total return of 0.92% in July, suggesting a rising market sentiment in line with a booming air travel industry. Notably, the U.S. set a record for passenger screenings in July 2023, reflecting the industry-wide trend toward recovery and growth amid increasing travel demand.
Solid Financial Metrics and Future Growth
According to forecasts, TPA is on an upward trajectory concerning passenger volumes, with 11.56 million enplaned passengers recorded in the fiscal year ending in September 2023, overshadowing the pre-pandemic figures from fiscal 2019. Moody’s reports that the airport saw a significant 10.1% increase in enplanements during the first three quarters of fiscal 2024 compared to the previous year.
The airport’s strategic financial management is underscored by its revenue framework and the ability to provide a solid debt service coverage ratio. Moody’s rated the liquidity of TPA as strong, with a healthy liquidity position of 756 days as of September 30, 2023.
Despite the robust outlook, there are crucial financial considerations to be mindful of, including the airport’s extensive capital program amounting to approximately $3.5 billion through fiscal 2030. The issuance of new debt, projected at around $1.7 billion during this period, requires careful navigation to sustain long-term financial health without overleveraging.
Embracing Future Challenges
It’s essential to acknowledge potential hurdles, such as environmental factors and the fluctuations that tourism can experience due to natural disasters like hurricanes. TPA recently weathered Hurricane Debby’s impact, demonstrating resilience and readiness to handle adverse conditions. Such unpredictabilities could influence passenger numbers, a factor TPA will need to strategically manage moving forward.
Furthermore, the airport’s ability to levy an ad valorem tax provides it with a safety net, though it has not utilized this option since 1973. This may be a potential consideration for funding future projects if needed.
Tampa International Airport stands poised to transform and elevate its infrastructure capabilities in alignment with burgeoning travel needs. By capitalizing on favorable market conditions and robust investor interest, TPA is not just constructing facilities, but also laying the groundwork for sustained growth in the years to come. The future looks promising as it navigates through its capital program while continuously adapting to the evolving landscape of U.S. air travel.