Press Release|Public Finance
KBRA Affirms AA- Rating with Stable Outlook for the City of Houston, TX Airport System Subordinate Lien Revenue Bonds
15 May 2025 | New York
KBRA affirms the long-term rating of AA- with a Stable Outlook to the City of Houston, TX Airport System Subordinate Lien Revenue Bonds.
Key Credit Considerations
The rating was affirmed because of the following key credit considerations:
Credit Positives
- Large and growing catchment area generates strong origin and destination (O&D) demand, while the System’s geographically strategic location promotes connecting activity.
- Financial operations are characterized by abundant liquidity and ample debt service coverage margins.
- Market yields are well above United and Southwest respective system averages.
Credit Challenges
- High market share concentration represented by, and resultant financial reliance on, United Airlines and Southwest Airlines which are the primary carriers at Intercontinental and Hobby, respectively.
- Significant capital program and resultant exposure to construction risk.
Rating Sensitivities
For Upgrade:
- Meaningful increase in passenger activity that generates improved financial performance as measured by debt service coverage and liquidity levels, as well as improving debt metrics.
For Downgrade:
- A significant increase in cost of the capital program resulting in a meaningful increase in leverage.
- A material reduction/elimination of hubbing operations by either United Airlines or Southwest Airlines
To access ratings and relevant documents, click here.