Moody's Affirms A1 Rating for Dallas TX Airport Enterprise's Senior Lien Revenue Bonds

Strategic Insights -

Moody's Ratings has affirmed the A1 senior lien revenue bond rating for the Dallas TX Airport Enterprise's bonds, which were issued by the Love Field Airport Modernization Corporation on behalf of the enterprise. The rating reflects the airport's entrenched market position, strong financial metrics, and moderate debt needs. The outlook remains stable, with factors that could lead to an upgrade or downgrade of the ratings noted.

Key Takeaways:

  • The airport maintains strong liquidity, with 737 days cash on hand at the end of fiscal 2024, and relatively low leverage, with fiscal 2024 adjusted debt per O&D enplanement around $115 and adjusted debt to net revenue at 3.3x.
  • The ratings are constrained by the high exposure to Southwest Airlines, which accounted for almost 97% of enplanements in fiscal 2024, but this risk is mitigated by the presence of Southwest's headquarters adjacent to the airport.
  • The rating is also constrained by federal limitations on Love Field's ability to grow and substantial competition from the Dallas-Fort Worth International Airport Board (DFW, A1 positive).
  • The stable outlook reflects expectations that Love Field will continue to have stable operations given the extension of Southwest Airlines Co's new lease agreement until 2040.
  • Factors that could lead to an upgrade of the ratings include sustained senior lien DSCR above 5.0x and 2.0x on all obligations, and improved credit quality for Southwest Airlines.
  • Factors that could lead to a downgrade of the ratings include net revenue DSCR below 1.2x, sustained negative enplanement trends, and weakening in the credit quality of Southwest Airlines Co. below investment grade.

Statistics:

  • 737 days cash on hand at the end of fiscal 2024
  • 3.3x adjusted debt to net revenue
  • $115 adjusted debt per O&D enplanement in fiscal 2024
  • 97% of enplanements accounted for by Southwest Airlines in fiscal 2024
  • Leverage is relatively low for an airport of its size, with a DSCR of 5.0x in fiscal 2024

Sources:

  • Moody's Ratings (Moody's Investors Service)
  • Publicly Managed Airports and Related Issuers methodology, published in February 2023.

https://ratings.moodys.com/rmc-documents/398689

Alternative sources:

https://ratings.moodys.com

Rating Methodologies page