Tampa International Airport (TPA) is on the verge of an important financial milestone with plans to price $484 million in senior bonds, eligible for alternate minimum tax, come Thursday. This significant move closely follows a recent upgrade from Fitch Ratings, which enhanced the airport’s subordinate debt rating from A-plus to AA-minus. Such ratings are essential in providing confidence to investors, and TPA’s bonds are rated favorably by several agencies, including Aa3 by Moody’s, AA-minus by Fitch, and AA by Kroll Bond Rating Agency. The outlook across these agencies remains stable, suggesting a positive trajectory for the airport’s financial health.
The bonds in question, Series 2024B, will feature both serial and term maturities ranging from 2017 to 2044, with terminus dates extending to 2049 and 2054. Importantly, the bonds are designed to be callable at par, a feature that adds a layer of flexibility for TPA in managing its debt obligations. Ken Cushine, a principal at Frasca & Associates, noted the healthy interest in the bonds, indicating a strengthening position for the airport amidst increasing demand for air travel.
The interest in TPA bonds can be attributed to several factors. Joseph Krist, publisher of Muni Credit News, emphasizes that, despite the prominence of Orlando International Airport as a tourist gateway, TPA maintains a competitive advantage due to the allure of the Tampa and St. Petersburg beaches. This geographic advantage is expected to persist, especially with an anticipated train service connecting Tampa to Orlando, projected to bolster passenger numbers.
Cushine further substantiates this by noting the impressive range of investor interest, predominantly from insurance companies, banks, and bond funds, while also highlighting the satisfying response in the bond market following Fitch’s recent upgrade. Such strong backing from institutional investors speaks volumes about the confidence in TPA’s strategic plans and financial stability.
Proceeds from the upcoming bond sale will fund the construction of a new passenger facility, designated as Airside D. This development aims to enhance the airport’s capability by adding 16 new swing-gates, allowing TPA to better handle growing passenger demands. The overall cost of the project is estimated at $1.5 billion, with around $896 million expected to be financed through new debt. Additionally, an automatic people mover guideway will connect Airside D to the main terminal, representing an investment just shy of $100 million.
Phase three of a larger capital plan, which has seen prior phases completed in 2018 and another pushing towards a 2024 finish, is set to commence construction in September and reach completion by September 2028. This ambitious project aligns with TPA’s goal of meeting the burgeoning travel demands while also modernizing its facilities to enhance passenger experience.
The financial move comes in a context of robust demand in the U.S. air travel sector, evidenced by a record-breaking 84 million passengers screened in July 2023 at TSA checkpoints across the nation. Moreover, TPA has seen exponential growth in enplanements, with statistics reflecting 11.56 million passengers in fiscal year 2023, surpassing the previous record set in 2019.
Moody’s acknowledgment of TPA’s growing importance highlights the area’s economic development over the past decade, specifically pointing out that the airport’s passenger growth, along with inflation-driven non-airline revenue growth, has bolstered its debt service coverage ratio. Moody’s also mentioned the authority’s substantial ad valorem tax capacity within Hillsborough County, although the tax has not been levied since 1973. The airport’s ability to strengthen its financial foundation amidst ongoing growth is integral to its ongoing expansion initiatives.
However, growth does not come without its challenges. Moody’s has identified a significant capital program estimated at $3.5 billion from fiscal years 2025 to 2030, necessitating new debt issuance of around $1.7 billion. While TPA currently holds $1.33 billion in debt, with a substantial portion secured by a senior lien, these upcoming initiatives also expose it to potential economic volatility influenced by tourism rates and natural disasters like hurricanes.
Despite these challenges, Fitch’s rating upgrade, reflecting TPA’s strategic importance in the Central Florida market, paints a positive picture of the airport’s future. Central to TPA’s successful trajectory is its substantial catchment area, expected population growth, and a wealthy demographic that significantly outpaces the national average—key drivers that will continue to support its passenger traffic in the coming years.
Tampa International Airport is strategically positioned for both short-term and long-term growth. The upcoming bond issuance heralds a new phase of development aimed at accommodating increasing passenger demand, ultimately reinforcing TPA’s status as a critical player in the aviation industry.