The decision by American Airlines to pull out of Bob Hope Airport might further harm an airfield that has been grappling with a yearlong slide in passenger numbers, which gained the notice of an important credit rating agency.
American, which made up 7.5% of passenger traffic — roughly 3.9 million people — at Bob Hope from January to November 2011, will stop flying out of Burbank on Feb. 9, the airline announced Monday.
American flies two to three flights a day out of Burbank, said airline spokesman Ed Martelle. All flights go directly to American’s hub in Dallas-Fort Worth.
A prolonged period of declining passenger traffic has hurt parking and other revenues, prompting the credit rating agency Fitch in November to warn that affirmation of the Burbank-Glendale-Pasadena Airport Authority’s AA- credit rating would be “unlikely” unless the financial picture rebounded or there was a change in scope or borrowing elements for a planned multimillion-dollar transit center.
When the airport announced it was looking at bond financing for the transit center last year, Fitch looked at the airfield’s financial standing, which was strong, said Seth Lehman, senior director and head of U.S. airport ratings for Fitch.
However, because the airport was considering taking on so much debt, Fitch switched its outlook for the authority’s credit rating in May from “stable” to “watch negative,” Lehman said.
Two factors prompted the switch, Lehman said.
Parking revenues make up about 40% of the airport’s operating revenues — a high margin, he said. Also, Southwest is by far Bob Hope Airport’s busiest carrier, which means any cuts in flights by Southwest would probably have a significant impact.
Plans for the transit center, which will consolidate all rental-car operations under one roof, were scaled back in June after bids for the project came in $47 million to $69 million higher than the originally projected $112-million price tag.
At that time, the airport authority delayed its bond-financing efforts, Lehman said. However, Fitch looks at all credits with negative status every three to six months and continued its “watch negative” status for the airport in November.
Airport spokesman Victor Gill said officials are “working carefully with our financial advisors and airlines and rental-car companies to see what impact, if any, there is from [the American Airlines announcement].”
Regarding American’s departure, Lehman said it may not be negative if another carrier compensates by stepping up its number of flights.
And even if Burbank’s rating drops, an A-category rating is still good among mid-sized airports, he added.
Martelle said American’s decision to exit Bob Hope was made before its parent company filed for bankruptcy protection. Los Angeles International Airport is too close to the Burbank airfield for a separate operation to make economic sense, he said.
American will also discontinue its flight from Chicago to New Delhi in February and plans to cut 150 jobs.
All ground personnel for American Airlines in Burbank work through Airline Terminal Services, a third-party contractor based in St. Louis.
Brian McCormick, a spokesman for the firm, declined to comment on American’s exit from Bob Hope Airport.