- Title: JFK Airport's massive overhaul takes winding route through debt markets
- Date: 6th December 2023
- Summary: NEW YORK, NEW YORK, UNITED STATES (FILE - OCTOBER 31, 2023) (REUTERS) (SOUNDBITE) (English) PORT AUTHORITY OF NEW YORK & NEW JERSEY, EXECUTIVE DIRECTOR, RICK COTTON, SAYING: "Public sector capital dollars are scarce. They're challenging to deliver to large-scale, multibillion-dollar infrastructure. What the Port Authority has done is to create a financial model with it
- Embargoed: 20th December 2023 19:32
- Keywords: $19 billion redevelopment Helena Williams JFK Millennium Partners JFK's New Terminal One (NTO) John F. Kennedy International (JFK) Airport LaGuardia Airport Port Authority of New York and New Jersey (PANYNJ) Rick Cotton airport airport authorities funding infrastructure investment modernization municipal bonds
- Location: VARIOUS
- City: VARIOUS
- Country: US
- Topics: Economic Events,North America
- Reuters ID: LVA005907717112023RP1
- Aspect Ratio: 16:9
- Story Text: Passengers hustling through cramped roadways and terminals in and around New York City's John F. Kennedy International Airport are likely to see posters that warn them about construction.
Helena Williams is the chief executive of JFK Millenium Partners, a company with a $4.9 billion project to build the new Terminal 6.
"Today I'm standing on the roof of Terminal 7," said Wiliams. "And when Terminal 6 is fully constructed, Terminal 7 will be demolished."
U.S. airports are estimated to need an injection of about $151 billion for overdue renovations, and JFK was one of the ones most in need.
What was once one of the most dazzling airports in the world had become a poster child for chaotic, neglected U.S. infrastructure.
"This is really exciting," said Williams. "It's a new effort at JFK and it's been led by Governor (of New York State Kathy) Hochul and Rick Cotton, the executive director of the Port Authority of New York and New Jersey. They've invested $19.5 billion to redo, and reconstruct JFK Airport. They want to revitalize the infrastructure and bring it up to date. So our project is one project in that $19.5 billion. Ours is $4.9 billion. And it is to construct the new Terminal 6. And today I'm standing on the roof of Terminal 7. And when Terminal 6 is fully constructed, Terminal 7 will be demolished."
Municipal bond financing for U.S. airport construction is not unusual. But Wednesday's (December 6) issuance of $2 billion in bonds for the new Terminal One at New York's John F. Kennedy International Airport was - because of the steps needed to get to this point.
Last year, a consortium called New Terminal One secured $9 billion in financing in an unusual private-public transaction that was part of a broader $15 billion overhaul of the airport.
The deal included a $6.5 billion bank loan, the largest ever committed for an airport terminal - and it took several years and two restructurings before the financing was even secured due to municipal bond market volatility and illiquidity.
U.S. airports need an estimated $151 billion for overdue renovations, and JFK, once considered one of the most dazzling airports, had become a poster child for chaotic, neglected U.S. airport infrastructure.
Some believe the unusual financing package could build momentum for public-private partnerships for U.S. airport terminal projects. However, JFK's position is unique because its position as the biggest airport in the United States' largest city by population made such a deal attractive for private investors.
New Terminal One, or NTO - a consortium of labor, operating, and financial partners at JFK - was able to secure $6.5 billion in bank loans, but the terminal's construction costs were meant to be divided between bank loans and municipal bonds. The deal had to be restructured two separate times due to volatility and illiquidity in the pandemic period in 2021 and again after Russia invaded Ukraine in February 2022
More than 62 million passengers flew through JFK's passenger terminals in 2019, generating $51 billion in sales. The route between JFK and Heathrow, London's biggest airport, is considered the most profitable airline route in the world. And while most airports see a downturn in traffic during economic difficulty, JFK is less affected in down times, and then bounces back more quickly, Carlyle said.
"The environment for financing terminals is incredibly complicated. There are different types of bonds that can be used within a terminal environment. You're seeing public-private partnerships more on the side of parking facilities and consolidated rental car facilities because the financing and funding for those facilities is very cut-and-dry and much more easy to navigate," said Annie Russo, chief political and congressional strategy officer at the Airports Council International–North America, an airports authority organization.
The bond sale was oversubscribed by 7.7 times even after the group boosted the size of the transaction by $500 million to $2 billion due to demand. The consortium expects to continue refinancing through the municipal bond market.
The risk for JFK with private investment is that the additional cost for repaying investors could raise expenses for air carriers, said Russo.
Airports focus on "cost per enplaned passenger" or CPE, which represents the average airline payment per passenger who flies. Airports aim to keep that figure low to make it more attractive for airlines to want to fly there.
In 2022, JFK's CPE was $32.67, the highest among the largest 30 U.S. airports, with nearby Newark Liberty and LaGuardia airports ranking second and fourth, respectively, according to Federal Aviation Administration data.
By contrast, Dallas Fort Worth International Airport, also one of the busiest American airports, is financing a $5 billion expansion, with 80% coming from traditional municipal bond debt, according to CEO Sean Donohue.
Dallas's CPE was $12.19 in 2022.
JFK's NTO bank financing gave sponsors time to sell bonds later, said Nanda Kamat, head of infrastructure at Mitsubishi UFJ Financial Group (MUFG), one of the financial advisers on the bank deal.
Passengers hustling through JFK's cramped terminals don't likely know much about the complicated financing efforts. But the posters plastered amid construction gives them some idea of the goal; they read: "JFK can take you places. The 1990s will no longer be one of them."
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