JFK International Air Terminal LLC Rating Raised To 'BBB+' On Robust Operations, Criteria Reassessment; Outlook Stable

  • We are raising our rating to 'BBB+' from 'BBB' on the Port Authority of New York and New Jersey's (PANYNJ) senior secured series 6 and 8 special project bonds issued for JFK International Air Terminal LLC (JFKIAT), which operates Terminal 4. We are raising the rating based on improving credit metrics and assessment of the transaction under our project finance criteria that captures the performance of this essential single asset. The outlook is stable.
  • In 2018, we revised our U.S. public finance transportation criteria, and in conjunction determined that our project finance criteria are more suitable for assessing this transaction.
  • Following completion of the Phase II expansion project in January 2015, the project successfully ramped up to full capacity, with enplanements rising by 22% in 2015, 5% in 2016, and 4% in 2017, and stable performance in 2018, generating robust debt service coverage during a period of escalating debt service requirements.
  • The stable outlook reflects our view that this performance is sustainable given the strong demand for air service in the New York metropolitan area market and the limited capacity for airport flight operations.
CENTENNIAL (S&P Global Ratings) Feb. 4, 2019—S&P Global Ratings took the 
rating actions listed above. Actual enplanement levels for Terminal 4 
performed very well relative to prior forecasts, driven by Delta accelerating 
the Phase II expansion of Terminal 4, which added 11 gates to Concourse B. For 
example, actual enplanements in 2016 of 10.2 million exceeded the forecast for 
2020 (the final year of that forecast). Actual enplanements for 2018 increased 
by 1% to 10.7 million from 10.6 million the preceding year, reflecting stable 
operations at the terminal's capacity. We anticipate that future enplanement 
growth will be modest at less just 0.5% annually, as airlines continue to 
up-gauge and optimize use of the facility.

The outlook is stable, based on our forecast minimum DSCR of 1.86x in 2020 and 
our expectation that the project will continue to operate without material 
service interruptions. We expect it to generate robust DSCRs consistent with 
recent past performance between 1.8x and 2x. During the next two years, we 
anticipate that discussions with Delta regarding the Phase III expansion 
project will continue.

We could lower the rating if enplanements drop significantly, materially 
weakening debt service coverage to 1.75x or below. Erosion in credit quality 
for Delta alone, however, would not directly affect the rating. We may also 
lower the rating if additional debt is issued related to expansion plans or 
other purposes that reduce our forecast coverage given the absence of robust 
restrictions on additional parity debt, or due to increased risk due to 
construction if counterparty risk is not sufficiently mitigated.

We could raise the rating once event risk related to Phase III expansion 
subsides, specifically if we are comfortable that the construction-related 
risks are mitigated such that a higher project rating would be warranted, or 
if JFKIAT stops the project. We could also raise the rating if operational 
efficiencies widen margins such that the project achieves DSCRs of 2.5x or 
better in a manner that we believe will be sustainable.
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