Airport finances solid, despite declines
June 30, 2014
Even as airport officials step up their efforts to rebuild passenger service at Reno-Tahoe International Airport, a credit-rating agency says the airport's finances remain in decent shape.
Marily Mora, the airport's president and chief executive officer, told members of the Northern Nevada Development Authority in Carson City last week that the airport will seek approval from the Nevada Legislature next year for a statewide effort to market commercial service at Reno-Tahoe International, McCarran International in Las Vegas and Elko Regional Airport.
The legislative push comes as airport executives already are making a case that businesses and local governments in the region need to make a stronger commitment to the effort to attract more flights to more destinations.
Since 2005, Mora noted, the number of scheduled airlines serving Reno has fallen from 11 to seven today. The number of non-stop destinations available from Reno has fallen to 15 from 20 before the recession, and the number of available seats has declined by more than 35 percent as airlines cut back service and use smaller aircraft.
"The loss of air service has greatly impacted our communities," Mora said. "We're really got our work to do to get this back up."
While the effects of reduced air service ripple through the region's economy — affecting everyone from traveling executives to visiting bowlers — the airport itself feels the financial impact directly.
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Fitch Ratings took a fresh look at the airport's credit rating, and said this month it sees no reason to change the "A" rating that it assigned to $23.7 million in bonds issued by the airport.
But Fitch analysts noted that the portion of the airport's $43 million in revenues generated by airlines during 2013 declined by about 6.3 percent in 2013 compared with the prior year.
The landing fees and terminal rents paid by airlines account for about 29 percent of the airport's total revenues.
Non-airline revenue — everything from food-court concession income to slot-machine win to parking fees — accounts for the other 71 percent of the budget. Car rentals — which include a $1.25 facility charge — and parking by themselves generate more than third of the airport budget, Fitch analysts noted.
That diversity, along with a history of conservative financial management and little use of debt, is helping the airport weather its current challenges, the rating agency said.
On the other hand, Fitch noted that airport officials plan to take another $27 million in debt to expand cargo capacity. That borrowing is planned during the fiscal year that begins on July 1, 2015.
Speaking with members of NNDA last week, Mora noted that cargo shipments through the airport rose by about 4.5 percent last year — they were essentially flat nationwide — and have been rising even more sharply this year.
"That speaks well about what is happening in our community in warehousing and distribution," she said.
Further pressure on existing cargo facilities will come as Amerijet International Inc. begins using Reno as its West Coast hub. The company headquartered at Miami will be operating in a five-dock, 10,000-square-foot facility on the airport.
While the airport will need to invest in additional facilities to serve the growing cargo business, Mora said her executive team views air freight as one of the cornerstones of a financially healthy airport operation in northern Nevada.
Another cornerstone: Economic development on the properties surrounding Reno-Tahoe International as well as Reno Stead Airport on the north side of town.
Atlantic Aviation invested $7 million in a just-opened facility on the east side of Reno-Tahoe International to serve private aircraft, and airport executives are seeking proposals to develop a big swath of the 5,000-acre Reno Stead Airport.
That airport is one of four test sites for unmanned aerial vehicles in the state, and airport executives hope that some of the companies that use it for tests also will decide to develop more extensive operations.
Tina Iftiger, the airport authority's vice president of economic development, says a change in state tax law could provide a substantial boost to job-creation efforts around the airports.
The airport will make yet another effort — its third — during the 2015 legislative session to win approval of a sales-tax break for companies that purchase airplane parts.
Nevada is alone among its neighbors in the West in levying a full sales tax load on airplane parts, Iftiger said, and the tax difference is enough to keep some aircraft maintenance operations from expanding in northern Nevada.
While lawmakers have been skeptical in past sessions, Iftiger said airport executives now can show that the economic development spurred by the tax reduction would more than make up for any lost revenue.