BOSTON (S&P Global Ratings) Jan. 7, 2025–S&P Global Ratings assigned its ‘AA-‘ long-term rating to the $996.36 million in series 2025 second series revenue bonds issued by the San Francisco City & County Airport Commission for San Francisco International Airport (SFO), which is made up of $870.6 million in series 2025A (AMT), $108.4 million in series 2025B (non-AMT), and $17.2 million in series 2025C (taxable) bonds.
At the same time, we raised our long-term rating and underlying rating (SPUR) on the commission’s senior airport system revenue bonds, issued for SFO to ‘AA-‘ from ‘A+’.
The ratings on the commission’s variable-rate bonds outstanding, with letters of credit (LOCs) from Barclays Bank PLC and Sumitomo Mitsui Banking Corp., are affirmed at ‘AA+/A-1’, reflecting the application of joint criteria, assuming low correlation. The outlook is stable.
“The upgrade reflects SFO’s traffic recovery, rebound in financial performance, and recent modifications in the airline agreements that have improved our calculated coverage and liquidity measures that we expect the commission will maintain considering the airport’s sizable capital improvement,” said S&P Global Ratings credit analyst Kurt Forsgren.
SFO’s senior-lien bonds are secured by a pledge of airport system net revenue, including all revenue earned by the San Francisco City & County Airport Commission with respect to the airport. A portion of revenue derived from a $4.50 passenger facility charge (PFC) collected by the airlines and remitted to the commission has also been designated (on an annual basis) as revenue by the commission to pay debt service on PFC-eligible projects.
As of July 1, 2024, SFO had approximately $8.9 billion in debt outstanding. In January 2025, the airport anticipates issuing approximately $996 million in revenue bonds in three series A-C to fund a portion of the ongoing capital improvement plan (CIP) and repay about $375 million in all commercial paper notes (CP) outstanding.
We expect that SFO’s coverage, on a generally accepted accounting principles (GAAP) basis, will be at or near strong levels over the 2025-2031 forecast period. Aided by collection of operating revenue and capital improvement fund (ORCIF) payments, we calculate coverage as ranging from 1.27x to 1.12x over the 2025-2031 forecast period. While indenture coverage declines through 2031, SFO’s demonstrated practices of conservative budgeting and its history of financial outperformance of indenture coverage projections support our expectation that coverage will be near or above 1.25x.
“The stable outlook reflects our expectation that air travel demand for SFO will continue to grow and management will adjust revenue, expenses, and capital spending as needed to maintain financial metrics we view as strong while it funds its large capital improvement plan,” added Mr. Forsgren.
Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.spglobal.com/ratings for further information. Complete ratings information is available to RatingsDirect subscribers at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings’ public website at www.spglobal.com/ratings.
