Upbeat about airport

Director undaunted by latest bond rating, forecasts more flights

By John Howell
Posted 4/11/17

By JOHN HOWELL Without giving away any secrets, or for that matter creating any false expectations, Iftikhar Ahmad, president and CEO of the Rhode Island Airport corporation, told the Rotary Club of Warwick Thursday that Green Airport could get one or"

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Upbeat about airport

Director undaunted by latest bond rating, forecasts more flights

Posted

Without giving away any secrets, or for that matter creating any false expectations, Iftikhar Ahmad, president and CEO of the Rhode Island Airport corporation, told the Rotary Club of Warwick Thursday that Green Airport could get “one or two more” flights this summer. That’s in addition to flights starting this summer to Ireland, Scotland, Norway and Cancun.

This is all part of Ahmad’s plan to increase the number of nonstop destination Green flights from 17, “which is not good enough,” to 42.

“We need to do much,” Ahmad said. “The opportunity is here and, yes, we can do it.”

But, while there’s the promise of more flights, which will mean more jobs and an economic boost for Rhode Island, Ahmad is fighting an uphill battle. That was made all the more clear when Moody’s reaffirmed its Baa1 rating and negative outlook on RIAC’s first lien special facility bonds on April 4.

In its report, Moody’s said the rating takes into consideration “solid debt service coverage” on a $45 million bond and “adequate” total debt service on the second $42 million bond. The bonds are for the Interlink including the rental car parking garage and 1,500-foot people mover.

“The rating also reflects competitive pressures on the airport’s market position, which have already contributed to significant declines in enplanements and transaction days over the last ten years.”

Moody’s goes on to say the negative outlook reflects the airport’s “weakened revenue generating base.”

“The lack of revenue flexibility is particularly challenging in the context of the project’s [Interlink] narrow total debt service coverage, ascending annual debt service, and the airport’s weakened position in a competitive regional market.”

Ahmad didn’t get into the specifics of the Moody’s report at the Rotary Club meeting, although he mentioned it, and vowed the rating agency “would be eating their words” when they return to rate RIAC bonds again. He also pointed out that Moody’s is working off historical data and was not considering the additional flights and economic spin-off they would generate.

Ahmad said in considering the job here, he took a look at the airport’s passenger traffic history that was at a high of 5.7 million passengers in 2005 and as of 2016 was 3.6 million. He went much deeper than those numbers, looking at the regional market and the shares of that business held by Boston, Manchester and Bradley airports. He even examined the average driving time to those airports during different times of the morning commute. His analysis, which to a large extent was his presentation to the Rotary, he used in interviewing for the RIAC position. Ahmad came to Rhode Island from New Orleans where he was the director of aviation at Louis Armstrong New Orleans International Airport since 2010.

Ahmad said airlines are migrating away from smaller regional jets, which he said “are now parked in the desert” because they are more expensive to operate than the larger jets. Norwegian Airlines that will be flying to Ireland, Scotland and Norway will be flying 737 Max jets. Fully loaded, the planes require a runway longer than what Green has now but will have as of this December. RIAC plans to compensate Norwegian or the less than full flights it will need to fly to operate from Green until the runway extension is completed.

Norwegian is a discount carrier and what Ahmad aims to attract to Green. He sees that competitive environment as working to both the airport and customer’s advantage.

“We bring a market disruption here and prices go down,” he said.

Looking back on Green’s history, he noted it was Southwest’s entry into the region that fueled the airport’s spike in passenger traffic soon after the Sundlun terminal opened in 1996. Southwest remains as Green’s dominant carrier, but its traffic here has dropped as it initiated service at Boston.

“Not only did they [Southwest] break up with me, but they’re going out with my girlfriend,” said Ahmad.

Moody’s put it this way: “As regional connectivity to Boston has improved and low cost carriers and network carriers have increasingly focused service at BOS, PVD has lost O&D [originating and departing] passenger share, and the attendant rental car demand, in the New England market.”

Moody’s also finds Bradley International Airport located outside Hartford has likewise gained market share relative to Green in recent years.

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