A construction worker climbs a ladder during a topping out ceremony for the LAX midfield terminal … More
The 2020s have been a growth period for the nation’s airports. Now, projects are continuing, but a leading credit rating agency says their costs will rise due to more rapid inflation, which comes at a time when air travel is slowing.
“The outlook for the U.S. airport sector has changed to negative from stable,” Moody’s Ratings said in a report released this week. However, “Airport’s financial strength remains near an all-time high, providing a buffer to withstand a difficult 2025,” Moody’s analyst Ursula Cassinerio said in an interview.
Expansion projects are underway or planned at major airports including Atlanta, Charlotte, Chicago, Denver, Los Angeles, Tampa, San Diego, and Washington Dulles. “We have seen many of the airports, especially the largest ones, in the middle of projects that have been developing in the last few years,” Cassinerio said.
Moody’s now expects 2025 inflation to be 3.2%, up from its February expectation of 2.5%. “Increased inflation levels will affect the cost of capital plans,” Cassinerio said. “Airports will have to pay higher costs” and to issue more debt, she said. Airport revenue typically derives from charges to airlines and vendors, and to parking revenue, so that eventually costs are paid by airline passengers.
According to Moody’s report, “Trade tensions that strain supply chains will drive up the costs of materials for constructions. Construction budgets will also increase if tighter immigration policies result in labor shortages. With many airports in the middle of capital projects that cannot be suddenly interrupted or canceled, the increase in costs will likely lead to additional costs.”
In the worst cases, Moody’s said, since many airports “are using guaranteed maximum price contracts for capital plans, limiting the impact of cost increases, We expect the contractual strength of these agreements to be tested as parties entire into force majeure disputes to recover higher costs due to tariffs.”
Meanwhile, every recent indicator shows declining growth. The five largest U.S. carriers have all cut back on growth plans in recent weeks. So far this year, Transportation Security Administration daily screenings are flat compared with 2024. The decline has come primarily in low-cost domestic travel.
For instance, American Airlines, like competitors, is seeing “really significant weakness in the demand that books through our indirect channels, which is I think we believe is mostly our most price-sensitive customers, our customers for whom travel is most discretionary,” said Steve Johnson, vice chairman, on the carrier’s first quarter earnings call. “Our premium bookings are terrific,” he noted. “Our business bookings are terrific.”
Fortunately, most major airports are financially strong and have the backing of their key airline occupants. does not necessarily foresee any change in airport ratings. Most airports have “very strong financial positions for 2024,” Cassinerio said. “We think they have very strong metrics in coverage and leverage.”
For instance, Atlanta airport is working on a planned $1.4 billion widening of Concourse D, which would improve the existing 34 gates with more space inside for aircraft as well as more space outside for aircraft. Completion is expected in 2029. The airport plans continued growth in the future and is eyeing continued expansion to accommodate future growth.
“The capital improvement plan cost is $11 billion,” Cassinerio said. “Expansion is needed and is underway. They are very prudent in management of capital projects, have very good traffic performance and they have support from Delta to continue expansion.” Delta operates the world’s largest single airline hub at Atlanta.
At Charlotte Douglas International Airport, the plan is for $4 billion of work running through 2027. The centerpiece is a fourth parallel runway estimated to cost about $1 billion.
“The airport is well positioned to move forward,” said Moody’s senior analyst Cintia Nazima, in an interview. “It has a very strong financial profile, a low-cost structure and continued support from American Airlines when it comes to this commitment. Management has a proven track record of implementing changes as needed to the capital improvement program. ” American operates the world’s third largest single airline hub at Charlotte.”
Regarding ongoing negotiations regarding American’s lease at Charlotte, “continued commitment from American will be there,” Nazima said. “This is very important for our analysis.”
One more example is Dulles International Airport, a United hub. Over the next 15 years Dulles plans expansion spending of $9 billion, including preliminary spending for a fifth runway. Dulles has “good liquidity and support from United,” said Cassinerio.
