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Severe weather financial risk to airports

Staff writer ▼ | January 30, 2014
Flights cancelled due to the severe winter weather could result in financial risk to airports to varying degrees, according to Fitch Ratingst.
Airpot snow
Airpot snowFlights cancelled due to the severe winter weather could result in financial risk to airports to varying degrees, according to Fitch Ratingst.


"Passenger traffic is the lifeblood of airport revenue. Passenger generated revenue from terminal concessions, on-airport parking, and car rental are most at risk to changing conditions. All together, these revenues can contribute 40% - 60% of total airport operating revenues and quickly impact total non-aeronautical revenue generation. From the expense side, higher costs for snow and ice removal can impact net cashflow as well," said Seth Lehman, Senior Director at Fitch Ratings.

Flight disruptions have been widespread, with over 40,000 flights cancelled and 180,000 delayed during the 2013 2014 winter so far according to some estimates. Much of the disruption has occurred in the Midwest and Northeast, resulting in a ripple effect affecting every major airport across the U.S.

Airlines have limited flexibility when trying to reestablish flight patterns due to post-recession efforts to control seating capacity. With passenger loads consistently exceeding 80% over the last three years, accommodating passengers on delayed or cancelled flights is a significant challenge.

Most U.S. airports have strong cost recovery mechanisms and robust liquidity that provide ample flexibility to weather the conditions seen so far this winter. Credit implications are expected to be limited.


 

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