San Jose International Airport bond ratings affirmed by Fitch with stable outlook

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San Jose Airport bond ratings

Highlights

Fitch affirms San Jose International Airport's senior general airport revenue bonds at 'A' and subordinate CP bank notes at 'A-', Stable Outlook maintained.
Strong non-airline revenue, cost recovery under a hybrid lease agreement running through 2029, and a five-year $221.3 million capital plan support ratings.
Airport maintains robust liquidity and 2.4x five-year average debt service coverage; downside risk if coverage drops below 1.0x or leverage increases significantly.

Rating action and financial drivers

As reported by Fitch Ratings, the agency affirms San Jose International Airport's senior general airport revenue bonds at 'A' and its subordinate CP bank notes at 'A-', while maintaining a Stable Outlook. Fitch says the assessment is supported by the airport's largely origin and destination traffic base, upgraded facilities, and a debt load that remains sizeable but is decreasing.

The agency says strong non-airline revenue and cost recovery under the airport's hybrid airline use and lease agreement help keep cost per enplanement competitive in the region. That agreement runs through 2029 and includes revenue-sharing features and a minimum 1.25x coverage test under an extraordinary coverage protection charge.

Fitch also points to a manageable five-year capital improvement plan of about $221.3 million, funded mainly with airport cash and federal grants. The airport has recently completed terminal and other facility upgrades, and Fitch says current infrastructure is sufficient for recent traffic trends.

Traffic, leverage and regional positioning

SJC remains exposed to competition from larger nearby airports, notably San Francisco International Airport and Oakland, and Fitch notes that passenger volumes have returned to a baseline consistent with 2017 levels rather than the pre-pandemic boom period. The agency also highlights elevated airline concentration, with Southwest Airlines accounting for more than half of traffic.

Even so, Fitch says the airport's financial profile is supported by substantial unrestricted cash balances, moderate leverage, sound coverage and healthy liquidity. Fitch-calculated total debt service coverage remains robust in fiscal 2025, and the airport's rating case shows a five-year average debt service coverage ratio of 2.4x.

For future rating changes, Fitch says downside risk would emerge if traffic volatility or passenger declines push debt service coverage below 1.0x on a sustained basis, or if new borrowing for major capital projects lifts leverage materially. Positive rating momentum would require stabilized volume and sustained senior and total leverage at or below 6.0x and 8.0x, respectively.

Our earlier coverage of Fitch’s rating action on The Methodist Hospitals explained how the outlook was revised to Stable and the 'BBB-' ratings were affirmed as stronger supplemental Medicaid DSH payments supported a gradual financial recovery. We noted that despite supportive liquidity and low debt, operating performance remained uneven and rating stability hinged on sustained improvement in margins and balance-sheet strength.

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