Airport Financial Feasibility Studies for Capital Programs

What a Financial Feasibility Study Is

A financial feasibility study—formally titled the "Report of the Airport Consultant" when prepared in connection with a bond transaction—is a pro forma financial analysis that demonstrates whether an airport can fund a proposed capital program while maintaining compliance with its bond indenture covenants, preserving credit quality, and sustaining reasonable airline rates and charges.

The Report of the Airport Consultant is a required component of the Official Statement (OS) for virtually every airport revenue bond issuance. It provides the analytical foundation on which rating agencies assign ratings, underwriters price bonds, and investors make purchase decisions. The feasibility consultant's opinion—that projected net revenues will be sufficient to meet the rate covenant and additional bonds test over the projection period—is the document's core deliverable.

Three firms dominate this market segment: LeighFisher, Inc., Ricondo & Associates, Inc., and Unison Consulting, Inc. In a March 2025 evaluation by the Greater Orlando Aviation Authority (GOAA), LeighFisher reported completing 48 feasibility studies supporting $22.6 billion in bond issuance over a six-year period; Ricondo cited engagements at 11 large-hub airports; and Unison referenced 150 airports (March 31, 2025). These firms are registered with the SEC and MSRB as Municipal Advisors under the Dodd-Frank Act.

Why It Matters: The Scale of Airport Debt

U.S. airports carried $151 billion in outstanding bond par amount as of January 2, 2025, with $9.6 billion in annual aggregate debt service payments (ACI-NA, 2025 Airport Infrastructure Needs Study, citing Bloomberg data). ACI-NA projects $173.9 billion in airport infrastructure needs for 2025–2029, averaging $35 billion annually. At least 65% of airport capital projects over the past decade have been financed through bonds.

Each new bond issuance that adds to this debt load requires a feasibility study demonstrating that the airport can service the incremental debt while maintaining covenant compliance and reasonable airline costs. The feasibility study is the financial control mechanism that governs the pace at which airports can add leverage.

Structure of a Report of the Airport Consultant

The Ricondo scope of work for Yampa Valley Regional Airport's Series 2026 Bonds (November 11, 2025) provides a representative outline of a feasibility report's contents:

Chapter	Content
Letter and Summary	Introduction, overview of key assumptions, projections, and findings
Proposed Financing	Transaction details: legal structure, resolution terms, security pledge, rate covenant, additional bonds test, flow of funds, sources and uses of funds
The Airport	Governance structure, physical description, location, air trade area, competing airports, airfield/terminal/facility descriptions
Capital Program and Funding Sources	Multi-year CIP: project descriptions, estimated costs, construction schedule, funding sources (grants, PFCs, bonds, airport cash) with estimated amounts and cash flow timing
Demographic and Economic Analysis	Historical and projected economic/demographic trends in the air trade area: GDP/personal income, population, employment, major employers, tourism drivers
Passenger Demand and Air Service Analysis	Historical enplanement and air service trends; forecasts of future passenger activity derived from economic projections and known airline service changes
Financial Analysis	Review of airline use and lease agreements; historical financial performance; development of assumptions for revenues, expenses, and inflation; pro forma projection (5–10 years) incorporating proposed debt service; calculation of debt service coverage and covenant compliance

The Yampa Valley engagement budgeted 666 labor hours and a fee not to exceed $199,000 ($204,000 with optional in-person meetings), with four report drafts—two preliminary, one rating agency draft, and one final for the Official Statement (November 11, 2025).

The Analytical Engine: Pro Forma Financial Projection

The financial analysis chapter is the core of the feasibility study. It projects the airport's revenues and expenses forward over a 5-to-10-year period and demonstrates two things:

1. Rate covenant compliance — that projected net revenues in each year of the projection period equal or exceed the required multiple (1.25x at most airports) of annual debt service on all outstanding bonds plus the proposed bonds.
2. Additional bonds test satisfaction — that the airport can meet the ABT requirements in its master trust indenture, whether based on a historical test, a prospective (consultant certification) test, or both.

Building the Revenue Projection

Revenue projections begin with the airport's historical revenue base, segmented by source:

• Airline revenues: Landing fees, terminal rents, apron charges, loading bridge fees. These are a function of (a) the rate-setting methodology (compensatory, residual, or hybrid), (b) the projected activity level (landed weight, enplanements, gate utilization), and (c) the terms of the airline use and lease agreement.
• Non-airline revenues: Parking, ground transportation (TNC fees), rental car concessions (including CFC-backed facilities), food & beverage and retail concessions, advertising, property rentals, fuel flowage fees. Non-airline revenues are driven by enplanement levels, concession contract terms, and escalation formulas.
• PFC collections: Based on the authorized PFC level ($4.50 at most airports) multiplied by projected eligible enplanements, net of the airline collection fee. PFC revenue may be applied on a pay-as-you-go basis or pledged to bond debt service.
• Grants: AIP entitlements, BIL AIG allocations, and any ATP competitive grants in hand reduce the bond-funded portion of the capital program but are not pledged revenues under the indenture.

Each revenue line item requires a disclosed assumption. The feasibility consultant derives growth rates from historical relationships between revenue and activity (e.g., non-airline revenue per enplanement), adjusted for known contract terms and inflation assumptions.

Building the Expense Projection

Operating and maintenance expenses are projected based on historical trends, staffing plans, contractual obligations (union contracts, service agreements), and inflation assumptions. The inflation assumption is a disclosed input—not an assertion. A defensible approach anchors it to an observable index: for example, the Consumer Price Index (CPI) trailing average, the Federal Reserve's implied breakeven inflation rate from the Treasury yield curve, or the airport's own historical O&M growth rate.

Incorporating the Capital Program

The capital program enters the model through three channels:

1. Bond proceeds: The proposed bond issuance (par amount, coupon rates, amortization schedule) generates debt service that enters the flow of funds at the debt service fund deposit level. The financial advisor provides estimated debt service schedules.
2. Grant funding: Federal grants (AIP, AIG, ATP) reduce the amount that must be bond-financed. The feasibility study discloses which grants are in hand (approved) versus projected.
3. Pay-as-you-go funding: PFC collections, CFC collections, and airport cash applied directly to capital costs without bond issuance.

The pro forma model then calculates net revenues (gross revenues minus O&M expenses) in each projection year, compares net revenues to aggregate debt service (existing plus proposed), and reports the resulting debt service coverage ratio (DSCR).

Sensitivity Analysis

Rating agencies expect the feasibility study to demonstrate coverage under baseline assumptions and under stress scenarios. Common stress tests include:

• Enplanement decline: A 5–10% reduction in projected enplanements, modeling the impact on airline and non-airline revenues while O&M expenses remain at baseline.
• Inflation shock: An increase of 50–100 basis points in the assumed O&M growth rate.
• Delayed project delivery: Capital cost escalation due to construction delays, increasing total project cost and bond par amount.
• Interest rate sensitivity: Higher assumed coupon rates on future bond issuances that are part of a multi-phase capital program but not yet priced.

The Moody's credit opinion for SFO (November 20, 2025) illustrates the rating agency perspective: SFO's adjusted debt per O&D enplanement was $443 in FY2024, projected to exceed $700 by FY2029 as $8.5 billion in additional debt is issued for the capital plan. CPE was projected to rise from the low $20s to the mid $40s by FY2030.

Key Financial Metrics in the Feasibility Study

Debt Service Coverage Ratio (DSCR)

The DSCR is the ratio of net revenues to annual debt service. A 1.25x ratio—the most common rate covenant level—means the airport generates $1.25 in net revenue for every $1.00 of debt service. The feasibility study must demonstrate that DSCR remains at or above the covenant minimum in every year of the projection period.

Airports set internal management targets above the covenant minimum. Phoenix Sky Harbor, for example, maintains a management target of 1.75x–2.00x on its senior lien, compared to the 1.25x covenant minimum (May 2025).

Cost Per Enplanement (CPE)

CPE measures the average cost to airlines for operating at an airport: the sum of airline landing fees, terminal rents, and other airline charges divided by total enplanements. CPE is not a bond covenant metric, but it is a primary indicator of airline cost competitiveness and is closely tracked by all three rating agencies.

A capital program that adds debt service will increase CPE under a compensatory rate structure, because the incremental debt service flows into the airline rate base. The feasibility study projects the CPE trajectory over the projection period, which allows the airport's governing body and airline tenants to evaluate whether the resulting cost level is supportable.

S&P Global Ratings noted in October 2025 that "the trendline for median CPE and debt per enplaned passenger (DPE) has been rising and we expect it will continue to climb for the foreseeable [future]" (October 27, 2025).

Debt Per Enplanement (DPE)

DPE measures total outstanding debt divided by annual enplanements. Among Moody's-rated large-hub airports, DPE and adjusted debt per O&D enplanement vary widely, with smaller hub airports generally carrying lower DPE than large-hub airports. A capital program that doubles outstanding debt without a proportionate increase in enplanements will drive DPE upward, which rating agencies evaluate as increased leverage.

Days Cash on Hand

Unrestricted liquidity—measured as days of operating expenses covered by unrestricted cash and investments—provides a buffer against revenue disruption. SFO maintained 579 days cash on hand in FY2024, reflecting substantial reserve strength. The feasibility study projects whether the capital program's funding requirements will draw down liquidity and whether reserves remain above rating agency thresholds.

The Plan of Finance: Sources and Uses

The plan of finance is the funding roadmap for the capital program. It assigns each dollar of capital cost to a specific funding source and schedules cash flows over the construction period. A representative sources and uses structure:

SOURCES
Series 20XX Bond Proceeds	Par amount of proposed bonds, net of issuance costs and DSRF deposit
Federal Grants (AIP/AIG/ATP)	Approved or projected federal formula and competitive grants
PFC Revenue (pay-as-you-go)	PFC collections applied directly to eligible capital costs
PFC Revenue (leveraged)	PFC collections pledged to debt service on PFC-backed bonds
CFC Revenue	Customer facility charges applied to rental car facility costs
Airport Cash / Reserves	Unrestricted funds contributed from airport operating surplus
Future Bond Issuances	Placeholder for additional series in a multi-phase program

USES
Construction Costs	Hard costs: sitework, building, systems, equipment
Contingency	A percentage of construction cost (5–10% is a common range for bond-funded projects)
Design and Engineering	Architectural, engineering, and program management fees
Capitalized Interest	Interest on bonds during construction, funded from bond proceeds so that debt service is not a cash expense during construction
Debt Service Reserve Fund	Deposit to DSRF (sized at MADS, 125% of average annual debt service, or 10% of par—whichever is smallest under IRC § 148 arbitrage rules)
Issuance Costs	Underwriter discount, bond counsel, financial advisor, rating agency fees, trustee fees, printing

The plan of finance must balance: total sources must equal total uses, and the timing of source availability must align with the construction draw schedule. A feasibility study that shows a funding gap—where identified sources fall short of estimated costs—will not support the required consultant opinion.

Interaction with the Airline Use and Lease Agreement

The rate-setting methodology in the airline use and lease agreement determines how capital program costs flow to airline rates:

• Compensatory: The airport sets rates to recover its costs. Incremental debt service from the capital program increases the airline rate base, which increases landing fees and terminal rents. Airlines bear no residual risk but may face higher CPE.
• Residual: Airlines collectively guarantee that the airport will generate sufficient revenue to meet all obligations. Under a residual structure, the feasibility study's CPE projection is particularly sensitive to enplanement assumptions: if traffic falls short of projections, the residual requirement per enplanement increases.
• Hybrid: Airfield fees may be residual while terminal rents are compensatory, or vice versa. The feasibility model must correctly apply the methodology to each cost center.

At airports where the airline use agreement requires majority-in-interest (MII) airline approval for capital projects above a threshold—or for bond issuances—the feasibility study serves as the analytical basis for airline deliberation. The projected CPE trajectory is the metric that drives airline support or opposition.

Rating Agency Review

The feasibility study is submitted to rating agencies (S&P Global, Moody's, Fitch, KBRA) as part of the rating process. The airport consultant typically attends rating agency meetings—either in person or virtually—to present the feasibility analysis and respond to questions.

Rating agencies do not take the feasibility consultant's projections at face value. They apply their own stress scenarios, compare metrics to peer airports, and evaluate:

• Reasonableness of enplanement forecasts — is the projected growth rate consistent with the air trade area's economic fundamentals?
• Inflation and cost assumptions — are O&M growth rates consistent with the airport's historical experience and current CPI trends?
• Capital cost estimates — what stage of design are the estimates based on (conceptual, schematic, construction documents)? Is there adequate contingency?
• Funding source certainty — are grants approved or projected? Are future bond issuances assumed, and if so, at what rates?
• Post-completion CPE — will the resulting airline cost level be sustainable, or does it approach a threshold where airlines may reduce service?

Moody's infrastructure scorecard for airports weights leverage and coverage at 27% of the total rating assessment, including net revenue debt service coverage and debt per O&D enplanement (November 2025).

Multi-Phase Capital Programs

Large airports with multi-billion-dollar capital programs do not issue all bonds at once. A $5 billion program may be executed over 5–8 years through multiple bond series. The feasibility study for the first series incorporates assumptions about future issuances, including estimated par amounts, assumed interest rates, and projected debt service schedules. These assumptions are disclosed as estimates, not commitments.

Each subsequent bond issuance requires an updated feasibility study reflecting actual financial performance since the prior issuance, revised enplanement data, updated construction cost estimates, and current market interest rates. The projection period resets with each new study.

At SFO, the capital plan anticipates $8.5 billion in additional debt issuance over 10 years (November 2025). Austin-Bergstrom (AUS) prepared a plan of finance for its master plan CIP that assumed multiple bond series through FY2030, with PFCs applied to debt service on existing bonds through FY2038 and excess PFCs redirected to future bond debt service thereafter.

Limitations and Disclosures

Every feasibility study carries a standard set of disclosures and limitations:

• The projections are based on assumptions and estimates, not guarantees. Actual results will differ from projections.
• The consultant has relied on data provided by airport management, the financial advisor, and public sources. The consultant has not independently audited the data.
• The opinion addresses financial feasibility—whether the airport can meet its covenants—not investment merit. The feasibility study does not constitute a recommendation to buy the bonds.
• Future events beyond the projection period are not addressed. A 10-year projection does not speak to Year 11.

These disclosures are not boilerplate. They define the scope of the consultant's liability and the boundaries of the investor's reliance.

Feasibility Study vs. Master Plan Financial Analysis

Dimension	Master Plan Financial Analysis	Bond Feasibility Study (Report of the Airport Consultant)
Purpose	Evaluate long-term (20-year) capital program affordability	Demonstrate covenant compliance for a specific bond issuance
Audience	Airport board, FAA (for ALP approval), airline stakeholders	Rating agencies, underwriters, bond investors, disclosure counsel
Projection period	10–20 years	5–10 years
Precision	Conceptual-level cost estimates, broad assumptions	Transaction-specific: actual debt service schedules, approved rates, known contract terms
Legal standing	Planning document; not a binding financial commitment	Included in the Official Statement; subject to securities law disclosure standards
Frequency	Updated every 5–10 years with master plan cycle	Prepared for each bond issuance

The master plan financial analysis provides the planning framework; the bond feasibility study provides the transaction-level proof.