Wednesday, February 13, 2013

Fitch: US Airways-American merger could affect hubs

Analysts Fitch Ratings, which rates revenue bonds issued by Charlotte Douglas International Airport and the city, now say they're concerned that an impending US Airways - American Airlines merger could affect traffic at the combined company's hubs.

Charlotte Douglas would be the combined company's second-largest hub. Most analysts have said they believe the hub is safe, even though US Airways operates 90 percent of the daily flights and US Airways connecting traffic accounts for more than 75 percent of the airport's passengers.

Fitch writes: "As seen in recent mergers, some hub airports will likely be strengthened through industry consolidation while others are weakened.

To the extent a merger consummates between American and US Airways, the combined carrier would effectively maintain six hub airports in Dallas-Ft. Worth, Miami, Chicago, Philadelphia, Charlotte and Phoenix. Separately, the combined carrier would maintain a sizable presence in markets like New York, Los Angeles and San Francisco. 

While geographic location and separation helps support a rationale for hubs, it is still fair to ask whether maintaining as many as six hub airports at the same level of operations will be necessary to maintain an efficient single network."

Here's why that matters. The airport issues revenue bonds, backed by money it makes from the airlines who use its facilities, to fund expansion project. Those bonds are rated by Fitch and other agencies, which helps determine the interest rate the airport gets, and how cheaply (or expensively) it can borrow money. Fitch bases its ratings, in large part, on how healthy the airport is likely to be in the future. If its future flight levels are uncertain, ratings could go down, and the cost of borrowing money and expanding the airport will rise.


Anonymous said...

Charlotte will remain a "hub", but only for smaller destinations in the SE/Mid Atlantic and to the other hubs.

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