Despite alarming concerns from a Branson-based airport consultant, Branson Airport Manager Jeff Bourk says the privately funded airport is about to hit its sweet spot.
In recent months, Branson Airport LLC has missed performance benchmarks as part of its funding and forbearance agreement, even after amending the agreement, but Bourk is downplaying the mounting financial losses – now exceeding $30 million since 2010 – and hanging hope on pending service by Southwest Airlines (NYSE: LUV).
Pulp nonfiction Michael Hynes, a Branson-based aviation management consultant, said he has followed the progress of one of the only private airports in the country since before it opened in 2009. After reviewing its 2011 financials and first-quarter 2012 results filed with the Municipal Securities Rulemaking Board, he concluded the company is strapped for cash.
According to the income statements, the airport reported first-quarter assets of $1.2 million against liabilities of $10.6 million. Net losses for the quarter were more than $4.6 million, which followed more than $17.2 million in losses for 2011. In 2010, Branson Airport LLC lost $13.4 million, according to statements provided to the Municipal Securities Rulemaking Board.
Troubling to Hynes is the fact the airport finished the quarter with three days worth of cash on hand, with $138,312. Cash on hand refers to the amount it would take to operate the airport for a single day.
As a comparison, according to the most recent Moody’s report, the median days of cash on hand for airports in 2010 was 489.
Hynes said the airport is increasing its passenger volumes – up roughly 15 percent in 2011 compared to 2010 – but the growth is too slow to make it profitable. Hynes, who has testified about 125 times on aviation matters in state and federal lawsuits since 1964, said he has completed pro bono work for Branson city officials, who are hoping to better understand the state of the airport. Hynes said he thought trustees of the airport’s $114 million in revenue bonds to fund construction of the 922-acre facility could foreclose on the airport by July 1 if a cash infusion is not made to support operations.
He estimates the airport could need between $50 million and $60 million to keep it up and running during the next six or seven years, which is how long he expects it to take for the airport to climb into the black.
“Losing money is not illegal,” Hynes said, adding that if investors are willing to keep pouring money into operations, the airport could carry on. “They feel the airport is going to turn around. I feel the airport is going to turn around.”
In a telephone interview, Bourk sidestepped Springfield Business Journal’s questions about the airport’s financial performance, turning attention toward service performance.
“Air service has grown every year since we’ve opened,” Bourk said. “We are very excited about the prospects for next year and the remainder of this year.”
He said Dallas-based Southwest’s Jan. 20 announcement that it would transition AirTran service to Southwest service before the end of the year bodes well for the long-term viability of the airport.
“Ultimately, we believe that leads to increased enplanements and traffic, which ultimately leads to more revenue,” Bourk said.
From there to here Branson Airport LLC entered into a forbearance and funding agreement in April 2011 with UMB Bank, the trustee that oversees $114 million in revenue bonds issued in mid-2007 to develop the airport.
The agreement requires the airport meet monthly and quarterly revenue and enplanement benchmarks or bondholders could take control of operations.
According to documents filed with the MSRB, the airport requested new benchmarks in September, and was granted a downgraded projection schedule in December. But still, the airport is not meeting its budget or its target passenger volumes.
The airport projected 4,996 enplanements, or boarding passengers, in January, 4,600 passengers in February, and 6,288 passengers in March. According to the first quarter report, enplanements during the first three months this year were 3,671; 3,008; and 4,928, respectively.
The first-quarter operating revenue budget was more than $1.2 million, but the airport reported to MSRB operating revenues of $911,778.
The April 2011 agreement states that foreclosure could occur if airport revenues and enplanement were less than 70 percent of budget. In February, enplanements were 65.8 percent of budget. However, bondholders have not filed to foreclose on the company.
“We have a great working relationship with both equity and bondholders,” Bourk said in an e-mail statement. “First-quarter enplanement numbers are a result of scheduling complications related to the integration of AirTran Airways into Southwest Airlines. Time will correct this. We are very excited about prospects for air service growth at the airport.”
Brian Krippner, a senior vice president for UMB and listed contact for the bondholders, did not respond to attempts to reach him for comment on this story.
While the airport might be missing its performance gates, Hynes said he doesn’t believe the trustee would foreclose on the airport on behalf of the bondholders because they would likely lose the value of their investment.
“I don’t foresee (UMB) taking any action to enforce the agreement,” Hynes said.
Southwest impact At least one aviation consultant familiar with the Branson market agrees with Bourk about the power of Southwest, which in January decided to keep service flowing through Branson Airport following its $1 billion buyout of AirTran Airways.
“In my opinion, the announcement by Southwest that it would retain Branson as one of the 22 service points in the AirTran network it would retain was a huge win for the Branson Airport,” said Jack Penning of Eugene, Ore.-based Sixel Consulting Group, which has completed some grant writing for the Branson-Lakes Area Convention & Visitors Bureau in an effort to secure marketing funds for the CVB and the airport. “The fact that Southwest said the market could support its frequency of service means not only that they believe in the market as a whole, but that they believe Branson can be the access point for the entire southwest Missouri area.”
Penning said Southwest entered Greenville/Spartanburg, S.C., and Charleston, S.C., about a year ago and have roughly doubled passengers in that time.
“That means, looking forward, not only are there going to be increases in passenger volumes, but that there will be significant increases year after year for the next several years,” Penning said. “Anytime Southwest enters a new market, enplanements grow significantly.”[[In-content Ad]]
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