The financial outlook has improved at Kansas City International Airport, according to the latest ratings report from Moody’s Investor Service.
Moody’s lifted its outlook on KCI’s $230.16 million in bonds to positive with an eye on what happens to costs with an upcoming decision to renovate or rebuild KCI’s terminals.
It currently rates KCI bonds a notch lower than Standard & Poor’s rates them, but Moody’s positive outlook could mean an upgrade.
Airport traffic has grown, and Moody’s said its positive outlook relies on that growth continuing. Passenger counts have increased in 12 consecutive months with April’s total climbing 7.2 percent over a year ago.
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Moody’s said it also wants “additional clarity on the debt needs, construction risk and cost recovery” of the airport’s pending makeover.
Specifically, Moody’s would like to see debt tied to the airport remain less than $225 per passenger enplaned during a year. As a mature facility, KCI’s debt has been paid down to about $50 per passenger, KCI’s chief financial officer John Green said.
“They understand, whatever we do, there will be an issuance of debt at that time,” Green said of Moody’s analysts.
Adding debt would require approval of Kansas City voters, Green said.
Airlines, and their passengers, carry most of the burden of repaying bonds that finance improvements. Moody’s said KCI’s cost per passenger “remains relatively low, which will continue to make the airport attractive to low-cost carriers.”
KCI’s scant consumer activity, from concessions for example, makes it especially dependent on airline fees. Moody’s noted the airport is making efforts to expand other revenue sources but added that “financial flexibility is constrained” by the low concessions activity.
The airport’s finances benefit from a fully occupied airline overhaul base, the development of the KCI Intermodal BusinessCentre adjacent to the airport and ownership of the Ambassador Building at KCI as sources of income independent of airline schedules.
Moody’s attention to low costs in the airport’s pending makeover echoes the preferences of Gary Kelly, the chief executive of Southwest Airlines. In April, Kelly visited KCI, where Southwest is the largest operator.
“I agree and Southwest agrees we definitely could stand to make some improvements. The question still remains exactly what is the best way to do that in the most cost-efficient manner,” Kelly had said.
City and airline officials have been working on ways to improve the 1970s-era airport. A redesign that would replace the existing three-terminal footprint with a single central terminal has drawn opposition from many who favor the convenience KCI currently provides Kansas City area travelers.
A mayor’s task force has favored a one-terminal rebuilt airport. City, aviation department and airline officials continue work on a final recommendation which is due by the end of April 2016.
To reach Mark Davis, call 816-234-4372. Follow him on Facebook and Twitter @mdkcstar