As federal funding for US airport infrastructure faces potential cutbacks, airport facilities could increasingly turn to the municipal bond market for financing solutions. According to a report from Bloomberg, many airports currently depend on federal grants for renovations and improvements, a dependency that might shift towards borrowing should federal support dwindle.

The Biden administration had previously allocated $14.5 billion over five years for airport modernization amidst a surge in post-pandemic travel, but a reversal of this funding trend could impact airport operations significantly. Seth Lehman of Fitch Ratings has highlighted that smaller airports, especially those located in tourist destinations such as Key West, Florida, and Myrtle Beach, South Carolina, could face the most significant challenges, as these facilities are typically more grant-reliant. In 2024 alone, US airports issued over $20 billion in municipal bonds, leveraging these to fund necessary infrastructure upgrades, based on data from Bloomberg and IndexBox. Although larger hubs, like New York’s John F. Kennedy International and Orlando International Airport, dominate this borrowing landscape, the lack of federal funds could force smaller airports to seek bonds or cut back on critical projects.

Looking forward, experts anticipate airport bond issuance might range from $15 billion to $20 billion this year, as the sector adjusts to new fiscal realities and explores municipal bonds as a viable financial avenue.

Source: IndexBox Market Intelligence Platform