S&P Upgrades Hawai‘i Airports Bond Rating

Daniel K. Inouye International Airport. Courtesy photo.

The Airports Division’s bond rating was upgraded by S&P Global Ratings to AA- from A+ in advance of its upcoming bond issuance, the Hawai‘i Department of Transportation (HDOT) announced on Aug. 2, 2018.

S&P recognized the strength of management as a key credit strength, noting that the Airports Division has: “Very strong management and governance, with management generally achieving or exceeding financial and operational goals, detailed financial projections, an experienced and deep management team, and generally well-defined project plans and targets with prudent risk mitigation.”

The rating agency cited the Airport System’s monopoly on commercial air travel, high passenger activity levels and strong financial performance.

“We’re making excellent progress with our Airport Modernization Program, and this second bond rating upgrade comes at just the right moment,” said Gov. David Ige. “This action supports lower borrowing costs as we continue to expand and modernize airport facilities to meet demand and grow our economy.”

The Airports Division was recognized for its continued efforts to implement its capital plan. According to S&P: “Several major capital projects are planned or underway that are aimed at modernizing the facilities, increasing system capacity, enhancing revenue, and improving passengers’ overall experience.”

The Airports Division held a ground-breaking recently in May for the Mauka Concourse Program at Daniel K. Inouye International Airport, which will add up to 11 gates and 280,000 square feet of terminal space. The Division is completing a new rental car facility at the Kahului Airport in the coming months; constructing another rental car facility in Honolulu; implementing energy efficiency projects throughout the System; and continuing to improve its terminal spaces with new and expanded duty-free, retail, and dining concession spaces. HDOT’s Airports Division has also taken steps to expand air service by working to accommodate the addition of Southwest Airlines to the Hawaii market, opening Ellison Onizuka International Airport at Keahole as the state’s second international Port of Entry, and adding System capacity to support larger aircraft such as the A380 that can hold up to 520 passengers per flight.

S&P added that “Management has historically operated in a fiscally prudent manner, budgeting conservatively, maintaining strong cash reserves, and modernizing and enhancing terminal facilities. The CIP, supported by the airlines, is demand-driven and modular, and the commission has several measures in place to mitigate construction risk.”

The credit rating increase was announced prior to the Airports Division’s 2018 revenue bond issuance, which is anticipated to raise approximately $400 million for capital needs of the Airports System over the next two years. The airports’ capital program will fund projects necessary to maintain, preserve and expand air service facilities across the state.