Airports around the world will probably have to rely heavily on debt financing to pay for their expansion, refurbishment and maintenance programmes in the coming years, Canada-based global credit ratings agency Morningstar DBRS points out. Airports will have to undertake such programmes because air passenger travel has not only recovered strongly from the Covid-19 pandemic, but is continuing to grow strongly.

The ratings agency cited global airports representative body, Airports Council International (ACI), which has forecast that the number of air passengers this year will exceed 10-billion, which would be an increase of 6% over last year (and a 16% increase over 2019) and would be a new record. The previous record was likely set last year, as ACI expected total air passengers for 2024 to number 9.5-billion.

But, during the pandemic, many airport operators had to cut, delay, or significantly downsize their capital investment programmes, as well as “reoptimize” (although continuing) their operations. And of course they had to continue with essential maintenance.

Fortunately, the strong recovery in air travel has brought financial relief to the airports. The result was that airports now had much stronger financial positions than they had in 2020/21.

“In our view, the next challenge for airports will be to fund their sizable expansionary and maintenance capital programmes in the coming years without materially eroding their financial resiliencies, competitiveness, or market shares,” stated Morningstar DBRS in its brief report. “In the absence of government and shareholders’ support, we anticipate airports will need to rely heavily on debt financing and aeronautical fee increases (where applicable) to meet their capital programmes’ funding needs.

“We believe passenger traffic in 2025 will continue to grow at a steady pace as long as the macroeconomic fundamentals remain supportive,” it concluded. “As airports begin to increase their capital spending on maintenance and expansionary projects in anticipation of future passenger growth, we anticipate the credit metrics of the airports may begin to feel the effects of the additional borrowing unless there is an unexpected surge in passenger traffic and/or revenues.”