St. Louis Lambert International Airport has received its best bond ratings in a decade following Fitch Ratings affirmation of nearly $300 million in outstanding City of St. Louis airport revenue bonds at ‘A-’ with an upgrade to positive, from stable. Fitch cited that the Positive Outlook reflects an expanding enplanement base, stable cash flow, and declining leverage at STL.
This is the third bond rating review issued in the last 45 days noting improved financial and operational outlooks for STL revenue bonds. S&P Global Ratings issued a stable outlook when it affirmed its ‘A-’ long-term rating on Aug. 31. Moody’s Investor Services upgraded STL’s bond rating to ‘A2’ (from ‘A3’) with an outlook of stable on Aug 7. With the Fitch ratings, it’s the first time that all three rating agencies have exceeded their ratings set in 2008 (Baa1 to BBB+).
"This latest rating from Fitch affirms the strong financial position and operations at St. Louis Lambert International Airport," said Comptroller Darlene Green, City of St. Louis. "I commend the airport management team for its ongoing strategy and success at reducing costs and increasing air service."
The Fitch rating cited numerous improvements in STL’s operational forecast for its upgrade including stronger underlying passenger demand, a favorable airline use and lease agreement, modest capital needs, and a conservative debt structure that includes a maximum annual debt service of $68 million in 2018, with a declining amortization schedule to follow.
“Leverage is expected to steadily decline through the forecast period to under 4x in fiscal 2022, including the issuance of $28 million in new debt for the capital plan in fiscal 2019,” according to the Fitch report. “Continued positive operational performance over the next one to two years, generating stable to growing cash flow and fund balances that result in steady airline costs and overall leverage below 5x, would support an upgrade.”
STL has approximately $595 million in outstanding bond debt as of October 2018. St. Louis City has an opportunity for a bond refunding on approximately $93 million on its 2009A-1 Series debt in 2019 that could produce upfront savings and further enhance the Airport’s amortization schedule.
STL will surpass 15 million total passengers in CY2018, which hasn’t been accomplished since 2007. The Airport has served 10.4 million passengers through August, a growth rate of six percent over a year ago. The Airport has recorded three years of month-over-month passenger growth which has leveraged its ability to reduce costs. In FY2017, STL’s cost per enplaned passenger (CPE) dropped to $11.10, down from $13.90 in FY2014. The CPE setting for FY2018 was $9.90.
STL welcomed two new airlines in 2018 to join nine other major carriers. Sun Country Airlines began weekly flights to Fort Myers, FL (RSW) last week, expanding to Tampa (TPA) next month. WOW air began non-stop flights to Iceland in May. STL airlines operate 270 peak daily departures to 70 non-stop destinations.