Tampa International Airport (TPA) is set to embark on a significant financial endeavor by issuing $484 million in alternate minimum tax (AMT) eligible senior bonds, slated for pricing on Thursday. This move comes just after the airport received an upgrade from Fitch Ratings, which raised the rating on its subordinate debt from A-plus to AA-minus in late July. Currently, the bonds issued by the Hillsborough County Aviation Authority have received commendable ratings: Moody’s has rated them Aa3, while Fitch and Kroll Bond Rating Agency have given them AA-minus and AA ratings, respectively. These robust ratings indicate the airport’s strong financial position and its potential for sustained growth.
The upcoming Series 2024B bonds feature a series of maturities from 2017 to 2044, alongside term maturities set for 2049 and 2054. One notable aspect is the callable nature of these bonds at par, which provides flexibility for future refinancing if necessary. The interest in these bonds has spiked due to the recent credit upgrade, signaling a strengthening fiscal outlook for the airport.
The competitive landscape for airports in Florida is notable, particularly with the proximity of Orlando International Airport (MCO). Joseph Krist from Muni Credit News reflects on this dynamic, asserting that not all travelers heading to Disney World will necessarily fly into MCO; TPA has its own share of passenger traffic, especially given its proximity to popular tourist destinations along the coast. With developments such as a train link to Orlando in the works, the airport’s passenger share is expected to rise, solidifying its market position.
The appetite for the new bonds has reportedly been robust, with interest peaking among insurance companies, banks, and bond funds. Senior manager JPMorgan leads the sale, further indicating institutional confidence in the airport’s long-term viability. This strong interest from well-established financial entities speaks volumes about the perceived stability and growth potential of TPA.
A significant portion of the raised funds will facilitate the construction of a new passenger facility known as Airside D, which aims to enhance the airport’s capability to accommodate rising travel demand. The development will introduce 16 additional gates, facilitating connections for both domestic and international travelers. With a projected cost of $1.5 billion for this project and roughly $896 million financed through new debt offerings, the expansion is critical not only for growth but also for improving the overall traveler experience.
Moreover, TPA plans to create an automatic people mover system that will connect Airside D with the main terminal, amplifying efficiency within the airport’s operations. This initiative, costing just under $100 million, underscores the airport authority’s commitment to maintaining a state-of-the-art facility that can handle projected increases in passenger volumes.
Moody’s has pointed out several elements contributing to TPA’s financial strength. These include its leading role in the Tampa Bay region, consistent economic growth, and increasing tourism activity. In fiscal year 2023 alone, the airport witnessed a record-breaking 11.56 million enplaned passengers, surpassing pre-pandemic numbers from fiscal 2019.
Fitch’s analysis also highlights the airport’s strategic capability to cover operational costs through its rate-setting framework, which ensures full cost recovery. The recent growth in passenger volume and the airport’s ability to leverage favorable economic conditions, such as demographic shifts within its service area, further bolster its financial profile.
However, it is important to note that the airport is steering through a significant capital plan, projecting a total expenditure of about $3.5 billion between fiscal years 2025 and 2030, which will require the issuance of additional new debt. The expected liquidity of TPA, which stands at 756 days as of the end of September 2023, provides a buffer against potential financial disruptions.
Despite the promising outlook, TPA faces inherent challenges. The airport’s revenue streams are vulnerable to fluctuations in enplanement driven by tourism trends and external factors, such as natural disasters like hurricanes. The recent brush with Hurricane Debby illustrated operational risks, as certain delays occurred in service during adverse weather conditions.
Moreover, as Moody’s alluded, while the airport’s competitive positioning against Orlando is fortified by their distinct service areas, fluctuations in air travel patterns could still affect long-term performance. In light of these factors, maintaining a robust and flexible operational strategy will be vital for TPA as it navigates its ambitious growth plans.
Tampa International Airport stands at a critical juncture, with substantial investments poised to enhance its infrastructure and operational capacity. With solid credit ratings and a strong foundation for revenue generation, the airport is well-equipped to tackle upcoming challenges while capitalizing on advancements in air travel demand.
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