By Mar-Vic Cagurangan
Moody's Investors Service has confirmed the A.B. Won Guam International Airport’s investment-grade rating of “Baa2” with a stable outlook on its senior revenue bonds.
“The stable outlook reflects Moody's expectation that enplanement recovery will continue to improve, albeit at a slower pace than most other U.S. airports and at the low end of the airport's own range of projections,” Moody’s said, noting that the rating action affects $192 million in outstanding debt.
The airport authority survived Moody's 90-day review for downgrade following Typhoon Mawar that hit Guam on May 24, cutting off power, water and communications and leaving trails of destruction throughout the island.
The Category 4 typhoon caused the airport to shut down for five days, leaving hundreds of tourists stranded on Guam.
Typhoon Mawar barreled through Guam while the visitor industry was just recovering from the Covid-19 pandemic that caused world travel to pause.
“Despite the challenges presented by the coronavirus pandemic and Typhoon Mawar, airport management has taken key actions to ensure debt service coverage remains satisfactory, including debt restructuring and operating cost reductions,” Moody's stated in its rating report.
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Baa2 is the ninth highest rating in Moody's Long-term Corporate Obligation Rating. Debts rated Baa2 are subject to moderate credit risk. Considered medium-grade, obligations with this rating "may possess certain speculative characteristics, according to Moody's.
For the Guam airport, Moody’s said the rating confirmation and stable outlook reflected its expectation that debt service coverage "will remain satisfactory even as enplanements continue to lag the U.S. airport sector as well as budgeted expectations."
“Although Typhoon Mawar appears to have marginally slowed the recovery of visitors to the island, enplanements should nonetheless remain within the lower bound of our range of expectations with the re-opening of travel following the coronavirus pandemic,” Moody’s said.
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The rating agency also took into consideration the airport’s critical role in the local economy as the island’s only commercial airport, “balanced by its relatively small size and concentrated exposure to the South Korean and Japanese tourism markets.”
While visitor arrivals have yet to reach the pre-pandemic levels, Moody’s noted that data for July and August indicated that the industry is approaching pre-Mawar performance.
“In August, GVB reported 67,325 arrivals, comparable to March 2023, but less than half the nearly 138,000 average monthly arrivals from 2019,” Moody’s said. “For fiscal 2023 overall, management estimates 890,000 total enplanements (including both visitors, residents and other travelers), just below the 900,000 low-range estimates it had been expecting.”
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The Guam airport is forecasting 1.42 million enplanements, or approximately 118,000, for 2024, according to Moody's.
"This is approximately mid-way between the low-range (1.3 million) and high-range (1.6 million) of projected enplanements. GIAA does not anticipate enplanements returning to pre-pandemic levels until 2025," the agency said.
But even if air traffic continues to trend toward the lower end of projections, Moody's noted that the airport authority has other revenue sources.
"Credit metrics should be supported by GIAA's airline lease and operating agreements with signatory airlines, most of whom have resumed flights in the past year; landing fees are based on a residual rate-setting methodology and enplanement fees, arrival fees and immigration inspection fees on a compensatory rate-setting methodology," Moody's said.
Artemio “Ricky” Hernandez, the airport's acting executive manager, welcomed Moody's optimistic analysis.
"This rating confirmation is a testament to the dedicated employees of the GIAA for their continued commitment to work cost-effectively while maintaining a safe and secure travel environment,” Hernandez said. “We also thank the Guam Economic Development Authority and the Bureau of Budget and Management Research for their support through this review process.”
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