Dallas-Fort Worth International Airport joint revenue bond rating lowered to ‘A’ from ‘A+’ On COVID-19 impact

S&P Global Ratings lowered its long-term rating and underlying rating on Dallas-Fort Worth's airport joint revenue bonds, issued for Dallas-Fort Worth International Airport (DFW), to 'A' from 'A+'. The outlook remains negative. At the same time, S&P Global Ratings assigned its 'A' rating to the airport's $994.8 million series 2020A joint revenue refunding bonds (taxable). S&P Global Ratings also affirmed its 'A-1' short-term rating on the airport's commercial paper (CP) program, which reflects our opinion of DFW's credit quality and its provision of self-liquidity in the event of a failed CP rollover.

"The rating action and negative outlook are based on the severe drop in enplanements and the significant negative impacts of the COVID-19 pandemic that, in our view, is likely to depress passenger levels and financial performance over the intermediate term and could increase volatility of activity," said S&P Global Ratings credit analyst Todd Spence.

Key credit strengths, in our opinion, are DFW's:

• Relatively large and economically vibrant service area, which encompasses the Dallas-Fort Worth consolidated metropolitan statistical area with a large population base growing at a rate that is more than double the forecast national level;
  
• Favorable geographic location in the national air transportation system, airfield capacity, terminal facilities designed for efficient connecting traffic, and its critical role as the largest hub of American Airlines;
  
• Long record of maintaining high levels of unrestricted cash, with $990 million or 631 days' cash as of Sept. 30, 2019; and
  
• Experienced, proactive, and effective management team.
  

Key credit weaknesses, in our view, are DFW's:

• Exposure to potentially prolonged weak or unpredictable enplanement levels due to COVID-19 outbreaks and lingering associated impacts (such as the pandemic-induced recession, shifting travel restrictions, stay-at-home and social distancing restrictions, or behavioral changes with respect to air travel), making effective financial budgeting and planning challenging;
  
• Hampered cash flow generation ability due to severe declines in enplanements related to factors outside of management's control, pressuring financial metrics;
  
• High airline concentration, with financially stressed American Airlines ('B-/ Negative'), its largest carrier, accounting for approximately 85% of total passengers; and
  
• Relatively high debt levels with significant capital needs.
  

Our rating action incorporates our opinion regarding the health and safety risks posed by the COVID-19 pandemic, which we view as a social factor that is resulting in significant operating and financial pressures for the airport. We analyzed DFW's risks related to environmental and governance factors, and consider them to be in line with our view of the standard for the airport sector. We will continue to evaluate these risks as the situation evolves.

We could lower the rating if we believe enplanement levels will remain materially depressed for a period longer than our current expectation, negatively affecting finances for an extended period of time.

We could revise the outlook to stable in the next two years with improved clarity on the trajectory of the passenger recovery and when we believe DFW's ability to maintain financial metrics consistent with the current rating is sustainable.