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ARRA Forum Tackles Airport Financing

ajay_thomasFinancial firms will continue to consider concessions contributions in their assessment of an airport’s credit-worthiness, despite the upheaval in those revenue streams experienced during the pandemic, Ajay Thomas, senior managing director and national head of public finance for FHN Financial said in a webinar Wednesday.

The online forum was hosted by the Airport Restaurant & Retail Association, provided a capital market view to financing airports and concessions, and was moderated by ARRA Executive Director Andrew Weddig.

Thomas said he doesn’t expect any changes to how investors assess airports. “The types of financing and how they structure financing may change, but the overall construct of … airport finance remains the same,” he said. “The big key difference has been … more of a focus on the travel experience, the overall holistic travel experience for the passenger.”

Thomas noted that the pandemic period was an anomaly in terms of airport revenues from concessions. “One of the things that has been enjoyed by the sector, and the investor particularly, is somewhat some predictable consistency and revenue, but for these shocks to the system,” he said.

Investors are beginning to look at the passenger journey beginning before the individual arrives at the terminal, with transportation options, food and retail pre-orders and other revenue-generating activities, Thomas said, with the eye on a comprehensive customer service experience that increases flow and, ultimately, passenger spending.

“I think we’re going see a lot of innovation and efficiency being brought into [the mix],” Thomas added. “Hopefully as [airport-tenant] contracts start coming up for renegotiation, there can be an open dialogue and the true partnership between airport, the community, as well as the concessionaires as to how to best provide that passenger experience.”

Thomas noted that the travel industry could be facing some challenging times as recessionary pressures ratchet up in the U.S. and globally. He said that while unemployment remains low, there is pressure on wages and disposable income. “The catalyst for domestic and leisure travel is for individuals to have real disposable income to spend on vacations and trips…and that is starting to be impacted,” he said.

“We could see something much larger than a serious size hurricane to the economy,” Thomas continued, “and have some pain that we have to go through before we come out on the other side.”