Billion-dollar O’Hare airport deal to be first of three this year
3 min read
Chicago plans to bring $1.003 billion of tax-exempt bonds to market Wednesday for O’Hare International Airport, part one of a three-phase financing plan for 2024.
Interest on the $563.9 million of general airport senior lien revenue bonds, Series 2024A, is subject to the alternative minimum tax. The $440 million of general airport senior lien revenue bonds, Series 2024B, are not subject to the AMT, according to the
KBRA noted that the airport has a proportionately higher share of business travelers than other airports, and business travel has returned to pre-pandemic levels more slowly than leisure travel.
More than half of the lost traffic compared to 2019 can be attributed to American — O’Hare enplanements for the airline and its affiliates were down 35% in 2023 compared to 2019. The airline has shifted focus elsewhere; according to the investor presentation, O’Hare accounted for 5% of American’s scheduled seat capacity in 2023, down from 6.8% in 2019.
Its market share at O’Hare fell to 29.9% from 35%, as United’s grew to 47.7% from 44.4% according to the investor presentation, which said both hub airlines are adding capacity there this year.
It remained in 2023 the world’s second-busiest airport by airport movements, according to
The airport said in its presentation that airline revenues went from $924.8 million in 2019 to $1.099 billion in 2023. Concession revenues per enplaned passenger have reached 115% of 2019 levels. But with fewer passengers, overall concession revenues were only $320.2 million in 2023 to 2019’s $322.1 million.
O’Hare had $255 million in its general fund and 370 days cash on hand as of Dec. 31, 2023. And its $800 million credit agreement note program “serves as an additional source of standby liquidity,” the presentation adds.
The Airline Use and Lease Agreement gives the city some leeway in how it delivers on its capital program, and so the city has prioritized construction of the Satellite 1 concourse and the O’Hare Global Terminal over the Satellite 2 concourse, the airport said in its presentation.
All told, O’Hare’s capital projects are expected to raise the number of gates at O’Hare to 220 from 203.
The airport says its capital project costs are currently estimated at $11.2 billion, but there are also $744.9 million of previous projects approved under prior agreements.
Cure said he will be watching how the two series of bonds — one subject to the AMT and one not — will do in the market. He pointed out that there could be changes to who is subject to the AMT if Congress
“The maturities are very similar,” he said of the bonds pricing today. “And they’re pretty close in size. So it’ll be interesting to see how they price differently. Usually you get a premium [on the bonds] for the AMT.”
Investors may take a cautious approach to these initial series of bonds, Cure said.
“If you’re concerned about all the factors I mentioned, you might want to wait to see if they’re on time and on budget before you buy any additional airport bonds,” he said.
“Because this is not their last time coming into the market, so you’re going to get another chance.”
