While there is likely to be little short-term impact on the credit ratings of American airports following the cessation of investment from the Federal Aviation Administration (FAA), long-term impacts could be significant.
That is the view of Fitch Ratings, which warned, with the federal debt ceiling situation simultaneously reaching a critical stage, it is unclear whether immediate attention will be given to pass an extension bill allowing construction to continue.
Late last week, Congress allowed the FAA’s operating authority to expire, thus causing significant near-term uncertainties with regards to the continued funding capabilities for the FAA and infrastructure investments at US airports.
As many as 70,000 jobs could be in danger as a result, warned the Associated General Contractors of America yesterday.
Fitch said, in general, airports have solid financial underpinnings which have remained largely intact even during the recent recession.
Larger airports tend to have manageable cash reserves or access into short-term borrowing markets to handle interim funding of capital costs.
They also have less general reliance on federal grant sources as part of their capital funding mix.
The overall impact to airport credits will thus “likely depend on how long this expiration period lasts” Fitch said in a special statement earlier.
Smaller airports in particular could be exposed to additional risks given the increased historical and prospective dependency on federal grants.
Should the expiration period continue, long or short, Fitch believes airports will need to consider making adjustments to managing their capital programs.