Airline merger threatens U.S. airports' credit quality: Moody's

WASHINGTON Tue Feb 19, 2013 10:36am EST

The tail sections of American Airlines (L) and US Airways aircraft are on the ramp at Dallas-Ft Worth International Airport February 14, 2013. REUTERS/Mike Stone

The tail sections of American Airlines (L) and US Airways aircraft are on the ramp at Dallas-Ft Worth International Airport February 14, 2013.

Credit: Reuters/Mike Stone

WASHINGTON (Reuters) - The merger of American Airlines and U.S. Airways to form the world's largest air carrier threatens the credit quality of U.S. airports, Moody's Investors Service said on Tuesday, as the combined airline may eliminate routes or push up ticket prices.

American Airlines parent AMR Corp (AAMRQ.PK), which filed for bankruptcy in November 2011, said last Thursday that it will merge with US Airways Group LCC.N.

The three major hubs for the airlines - Texas Dallas-Fort Worth International, Miami International, and Charlotte Douglas International Airport - could suffer from the merged company combining its operations, according to the Moody's special comment.

"The key risks for those airports are that the combined carrier may reduce service on overlapping routes or reduce service to markets connected by these hubs," the rating agency said. "Such capacity reductions give airlines a greater ability to raise fares, which in turn can result in lower passenger volumes."

Airports' revenues "are highly dependent on passenger volumes." In the past five years, the number of airlines has been cut in half, Moody's added, leaving airports exposed "to an increasingly concentrated pool of airline counterparties."

Smaller airports that were dominated by the two separate carriers, such as California's Fresno-Yosemite Valley Airport, face greater risk from the fewer airplane landing fees, terminal concessions, and parking fares as the number of passengers passing through could shrink from the consolidation, it said.

"When coupled with difficult economic conditions, airline mergers exacerbate the negative pressure already being exerted on U.S. airports," Moody's added.

(Reporting by Lisa Lambert; Editing by Nick Zieminski)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.