MIA finances get an upgrade by rating agencies
Oct 27, 2012 (Menafn - The Miami Herald - McClatchy-Tribune Information Services via COMTEX) --Strong international traffic, cost cuts and more profitable concessions have helped Miami International Airport draw a collective thumbs-up from credit agencies, including a recent upgrade by Standard and Poors.
A bankrupt American Airlines continues to be a potential problem for MIA, since the carrier accounts for more than 70 percent of the roughly 100,000 passengers that come in and out each day. But analysts see Miami as outpacing American's other hubs, largely thanks to its new terminals and the resiliency of the Latin American travel market. "Clearly Miami is kind of an outlier in terms of how well they've done over the last several years," said Joseph Pezzimenti, an airport analyst for Standard and Poors, which this month upgraded MIA's debt rating from A- to A. "There's a dynamic going on between the people who live there, the people who travel there and the Latin American market."
Pezzimenti said MIA's 6 billion debt remains too high for an airport of its size, and landing fees of about 20 per passenger aren't as competitive as they could be. Florida's other major airports, Orlando and Tampa, have A ratings from S&P, thanks to lower debt burdens. But recent reports from analysts describe a thriving MIA performing much better financially than many had expected when the recession began in late 2007. Passenger traffic has been up about 5 percent in recent years, compared to the 1 percent seen at most large airports, said Fitch analyst Seth Lehman. Despite its bankruptcy, American continues growing Latin American flights out of MIA, helped along by an expanded North Terminal.
"The timing has been very helpful for Miami," Lehman said. "The airport was able to accommodate American."
Fitch this month upgraded its outlook for MIA's finances from "negative" to "stable," an improvement it declined to make for Chicago and Dallas, American's other two major hubs. Fitch downgraded the three hubs last year when American filed for Chapter 11 bankruptcy protection.
The increase in MIA's traffic came with dramatically expanded retail and restaurant options in the new terminal, and a modern car-rental facility on the airport campus. "Our concessions have been booming, because we have more people to buy things from them,'' said MIA's CFO, Anne Lee.
Along with higher revenues, a five-year staff reduction engineered by airport director Jose Abreu helped reduce projected increases in MIA's budget.
In 2007, MiA employed about 1,600 people and is budgeted to have a payroll of 1,200 this year -- a 24 percent drop. That wasn't enough to keep costs down -- MIA's budget is up about 80 million in that timeframe to 430 million -- but did help lower forecasts of what the airport would be charging airlines in future years. Now at 20 per passenger, landing fees and other charges were once forecast to hit about 30 per passenger by 2018. Now they are expected to only rise by about 3 over the next five years, according to the Fitch report.
That's still significantly higher than the 4 Fort Lauderdale charges, and the Fitch report notes MIA faces increased competition from the airport to the north. Lehman, the Fitch analyst, also said American's commitment to MIA may lessen if it gets bought out of bankruptcy by a rival with other plans.
"If there is a merger, strategies can change," he said.
An earlier version of this story incorrectly referred to job cuts American Airlines as helping improve the credit rating at Miami Internatioal Airport. It was a reduction of MIA's payroll that contributed to the stronger finances at the airport.
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