Merger could squeeze Charlotte airport finances, Moody’s says

Merger could squeeze Charlotte airport finances, Moody’s says

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Merger could squeeze Charlotte airport finances, Moody’s says

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by ELY PORTILLO / The Charlotte Observer

WCNC.com

Posted on February 19, 2013 at 1:57 PM

Updated Tuesday, Feb 19 at 2:00 PM

CHARLOTTE, N.C. -- Charlotte Douglas International Airport and other major hubs could see their finances pressured by fewer flights if a merged US Airways-American Airlines reduces service, ratings agency Moody’s said Monday.

Charlotte Douglas will be the merged carrier’s third largest hub in terms of passenger enplanements, Moody’s said, accounting for 6.5 percent of the airline’s passengers. Charlotte Douglas will be the second-busiest carrier in terms of takeoffs and landings, with about 650 daily flights.

“The key risks for those airports are that the combined carrier may reduce service on overlapping routes or reduce service to markets connected by these hubs. Such capacity reductions give airlines a greater ability to raise fares, which in turn can result in lower passenger volumes,” Moody’s analysts wrote.

(Read: What the airline merger means for Charlotte and you)

Charlotte Douglas relies on connecting passengers for more than 75 percent of its traffic, the highest of any major hub airport, leaving the airport uniquely vulnerable to any cuts in service.

US Airways CEO Doug Parker and American Airlines executives have said the merged airline intends to keep service at its existing hubs and avoid major cuts. They’ve also said the merged airline will have directly overlapping service only on 12 domestic routes, meaning they won’t need to cut or divest many routes.

The airport currently has more than $820 million worth of bonds outstanding to finance ongoing expansions, such as the new 7,000-space parking deck. The airport pays off the bonds primarily with fees from the airlines who use Charlotte Douglas, parking and concessions. Charlotte Douglas collected almost $220 million in fees and charges for services in fiscal 2012.

“Airport revenues are highly dependent on passenger volumes, which will likely decline if the combined carrier seeks to improve its operating efficiency by reducing service levels, which we expect,” said Moody’s. The risk of revenue declining is heightened at airports such as Charlotte Douglas, which have a high concentration of traffic from one carrier.

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