KBRA Assigns Chicago Midway International Airport Senior Lien GARBs A, Stable Outlook; Affirms Second Lien Bonds
11 Oct 2023 | New York
KBRA assigns a long-term rating of A, with a Stable Outlook to the City of Chicago – Chicago Midway Airport Senior Lien Airport Revenue and Revenue Refunding Bonds, Series 2023A (AMT); Senior Lien Airport Revenue Refunding Bonds, Series 2023B (Non-AMT); and Senior Lien Airport Revenue Refunding Bonds Series 2023C (AMT). Additionally, KBRA affirms the long-term rating of A, and Stable Outlook, on the Airport’s outstanding Second Lien Revenue Bonds.
Key Credit Considerations
The rating actions reflect the following key credit considerations:
Credit Positives
- Strong, diverse, expansive air trade area supports O&D activity
- Ranks as the third busiest airport in its dominant carrier’s (Southwest) route system as measured by enplanements and scheduled seat capacity
- Residual agreements obligate airlines, mainly Southwest, to absorb necessary rate and rental charge increases
Credit Challenges
- High level of carrier concentration, as Southwest accounts for nearly 90% of enplaned passenger activity
- Narrow debt service coverage, reflecting an adequate, although strengthened, rate covenant and residual airport use agreement
- Non-airline revenue performance ranks among the lowest of U.S. commercial airports
Rating Sensitivities
For Upgrade
- Diversification of the carrier mix with concurrent enplanement growth
- Successful transformation of terminal concessions, resulting in enhanced non-airline revenue support
For Downgrade
- Significant reduction in Southwest Airlines operations at Midway
To access rating and relevant documents, click here.
This Rating Press Release was revised on December 8, 2023 to reflect the City's decision to issue three series of senior lien bonds rather than two.