When COVID-19 hit in 2020 and airports turned into ghost towns, it was anyone’s guess whether some airports (and their bond ratings) could weather the storm.

New research, published in a recent issue of the Journal of the Transportation Research Forum, shows how CARES Act funding helped Duluth Intl Airport avoid ratings downgrades and proceed with their construction projects.

The researchers found that the prospect of CARES funding let airport officials confidently proceed with already-planned construction projects:

While response to the pandemic was a priority, ongoing planning initiatives never took a hiatus. Two construction projects planned for the airfield in 2020, i.e., a mil and overlay of approximately one mile of taxiway as well as a commercial service apron expansion, continued. The CARES Act provided 100 percent Federal share for Airport Improvement Program Funding of approved capital improvement projects in Federal fiscal year 2020. Airport staff determined that the DAA could cashflow both projects. At a combined cost of approximately $2 million, completion of the projects in 2020 provided an economic stimulus to the region’s economy during the economic downturn.

Further, the CARES funding helped airports supplement revenue losses to avoid ratings downgrades (although many airports saw their outlook turn “Negative”):

The decline in traffic due to COVID resulted in a significant drop in revenue. Normally the loss of revenue and the resulting inability to make key payments would negatively impact an airport’s credit score and bond ratings. If the revenue reduction is short term and the airport has significant unrestricted cash reserves the bond downgrade may be minimal. One of the benefits of the CARES Act to airports was to offset revenue declines and increase liquidity.

The uncertainty about when normal flight operations would start up resulted in Fitch keeping the same letter rating on many airports’ bonds but in early 2020 advising a Negative Rating Outlook for these airports. In April 2020 select airports’ rating outlooks were upgraded to “Stable” by Fitch. However as noted in a Fitch report:

While the passage of the CARES Act reduces the risk of downgrades somewhat, it is not enough to result in Stable Outlooks at this time given the remaining uncertainties in the sector, including but not limited to, the severity and duration of enplanement losses, the length of the recovery period, the extent of revenue underperformance, and the financial health, willingness, ability of air carriers to make full and timely payments (Fitch Ratings 2020).