RIAC returns from visit to bond agencies with ‘treats’
It was Halloween when Kelly Fredericks, president and CEO of the Rhode Island Airport Corporation (RIAC) and a delegation visited bond-rating agencies in New York City.
And the visit paid off big time.
The treats they ended up receiving could save the agency $1.5 million to $2 million in interest expenses over the next 15 years.
“I couldn’t be happier,” Fredericks said Friday of the “stable outlook” Moody’s Investor Service and Standard and Poors have assigned RIAC bonds. Previously, the two agencies assigned a “negative” outlook to the bonds. A third rating agency, Fitch, upgraded RIAC to a “stable” rating in June.
The change in outlook and re-affirmation of their rating by all three agencies were expected to have a positive impact on the refunding of more than $38.2 million in bonds scheduled for yesterday. It’s difficult to know precisely what the improved outlook means in reduced interest rates, so Fredericks is guessing when he says, “It’s in the seven figures.”
On the visit to the agencies, Fredericks talked about the continued performance of Green Airport and his goal to have passenger traffic return to the more than 5 million recorded in 2005.
The message, evidently, resonated with the rating agencies.
In its rating rationale, Moody’s writes, “The change to a stable outlook considers that passenger activity appears to be on a path to recovery with RIAC registering seven straight calendar months of enplanement increases compared to the prior year, and enplanements are 5.6 percent higher through the first three months of FY 2014.”
In addition, Moody’s notes that there is additional seat capacity at Green, “which could provide greater traction to rising passenger levels.”
Moody’s said its A3 rating, which is unchanged, “primarily reflects management’s ability to maintain a stable financial position despite persistent year-over-year enplanement declines.”
Moody’s also looked at RIAC’s liquidity based on cash on hand that continues to be above 600 days.
“This level of liquidity is an important credit factor,” Moody’s writes.
It wasn’t all roses either.
Moody’s notes the state’s economic performance still lags behind national trends and “weakens the potential demand for air travel.”
On the positive side, it is noted that the cost per enplanement, a number used in comparing airline operating costs between airports, has stabilized at $11 to $11.50.
Looking at the future, and seemingly borrowing heavily of Fredericks’ pitch on why 5 million passengers is achievable, Moody’s points to the relative newness of airport facilities and that its catchment area covers a large population, including Rhode Island, southeastern Massachusetts and eastern Connecticut.
“RIAC’s position within the New England competitive landscape has become more clear and the airport is well positioned to capture additional market share,” reads Moody’s report.
As challenges, Moody’s cites that the state’s economy continues to lag and that RIAC debt burden is elevated when compared to other airports.
That doesn’t look to be improving soon as RIAC prepares to take on three major projects. One of those, the extension of the safety areas on the shorter Runway 16-34 is underway. RIAC is gearing up to build a de-icing recovery system and for an extension of the main runway that would enable aircraft to make non-stop coast-to-coast flights and enable more efficient operations without weight restrictions during summer months.
Fredericks said construction teams vying for the runway extension job have been narrowed down to a short list of three and that the RIAC administration has a recommendation that will be made to the RIAC board.