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Moody’s on airport credit quality, Delta buyout 

Dec 15 (UNI)

US Airways Group’s proposed buyout of Delta Air Lines, currently under bankruptcy protection, could affect the credit quality of some individual airports as some routes would be consolidated, hubs would be refigured, and overall capacity of the new airline would likely be reduced, Moody’s Investors Service says.
‘‘The route structures of US Airways and Delta have significant overlaps in many areas, which will present opportunities for cost savings through consolidation of routes,’’ says Moody’s Analyst Kurt Krummenacker in a new report. ‘‘In addition, the carriers have a number of airport hubs in close proximity to each other that offer additional consolidation opportunities.’’
If the buyout goes through, Moody’s does not expect a broad impact on the US airport sector as a whole. The impact on individual airports of a transaction would not be clear until the combined airline has a clear operating strategy.
The US Airways proposal is a highly complex situation with significant uncertainty. Whatever the fate of this particular proposal, Moody’s says the current environment may well lead to consolidation among carriers, in part given the strong market for liquidity.
A merger could affect airports in a number of ways. In particular, a buyout of Delta by US Airways could potentially affect, first, current hub airports, second, those airports at which both carriers have a significant presence, and, third, airports where neither airline is presently dominant, but at which the combined airline would be much more prominent.
US Airways has stated that it intends to reduce flight capacity after the proposed buyout by 10%. Moody’s notes that any service contractions would also encourage service growth from other airlines, reducing the decline.
Hub airports that could be affected by a US Airways -Delta merger include Atlanta and Charlotte, Cincinnati and Pittsburgh, and Salt Lake City, Las Vegas, and Phoenix.
Moody’s has ratings on 169 debt instruments issued by 114 U.S. airports or airport systems - 137 of these ratings reflect the own credit strength of the airport or project, and these ratings currently cover more than $70 billion in debt.
The full title of this Moody’s Hot Topic Special Comment is ‘‘US Airways Proposed Buyout of Delta Could Affect Credit Quality for Some Airports.’’