(Bloomberg) -- An influx of travelers passing through US airports has created a frenzied borrowing boom to raise cash for expansion projects.
Facilities in South Carolina, California, New York and Florida have plans to tap the municipal bond market in the coming weeks, adding to the $12.3 billion of airport debt already sold this year, according to data compiled by Bloomberg. That volume marks a more than 100% increase from the same period a year ago. Proceeds from the sales will be used to finance new renovation projects designed to improve passengers’ experiences.
“Airports are congested, there’s a lot more flights and we just need more improvements,” said Mikhail Foux, head of municipal strategy at Barclays Plc. “Traffic through airports is through the roof right now.”
More than 100 million people flew through American airports in June, the highest number of passengers since at least 2003, according to data from the Bureau of Transportation Statistics. That surge has caused crowding at gates and long-lines at concession stands, underscoring a need for expansion and renovation projects.
Over the coming years, the 10 largest US airports will need at least $55 billion to $75 billion of infrastructure improvements, said Vikram Rai, head of municipal market strategy at Wells Fargo & Co.
With lower borrowing costs bolstered by Federal Reserve rate cuts, airports are joining an issuance boom by municipal borrowers eager to get ahead of market volatility from the US presidential election in November.
Sacramento International Airport is expected to borrow $478.3 million of debt in a sale managed by Wells Fargo next week. Proceeds raised will be used to pay for infrastructure projects including a new pedestrian walkway and parking garage. The deal marks the initial portion of a $1.3 billion improvement plan designed to elevate the customer experience and meet projected passenger demand, according to bond documents.
It’s the largest capital initiative in the airport’s history, the preliminary offering statement detailed.
“We are absolutely bursting at the seams,” said Chris Wimsatt, deputy director of finance and administration at the Sacramento International Airport. The airport plans to tap muni investors again in 2025 and with potential issuances in 2026 or 2027.
Sacramento is joined by Charleston, South Carolina, which is selling $390.6 million to help finance the expansion of the East Concourse at Charleston International Airport as well as other projects. The concourse renovations will include five new gates, an increase in the number of ticketing positions and additional space for TSA checkpoints, according to bond documents. Construction is expected to begin in April 2025 and take about three years to complete.
The deal is rated A+ by S&P Global Ratings, a grade that reflects a belief that “the Charleston service area will continue to generate passenger demand levels to support the various expansion airport projects being targeted,” analyst Quinn Rees wrote in a release.
Charleston’s airport passenger volume has more than doubled in the last decade, bond documents state.
In South Florida, Lee County is borrowing $564 million to help finance an expansion project at the Southwest Florida International Airport in booming Fort Myers. The project includes 50 new airline ticket counter and bag-drop stations, 40 new check-in kiosks, a VIP lounge and a baggage handling system, according to the bond documents.
The county expects another issuance of about $450 million in the 2026 fiscal year to finance the completion of the airport’s terminal expansion project.
Muni investors currently have a wave of credits to choose from, though issuance isn’t expected to stay elevated forever.
“In the next couple years, this supercycle of capital improvements for airports will end and we’ll see less issuance,” Foux said.
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