Privately owned Branson Airport LLC entered into a forbearance and funding agreement April 12 with UMB Bank, the trustee that oversees $114 million in revenue bonds issued in mid-2007 to fund the construction of the airport.
According to the agreement filed with the Municipal Securities Rulemaking Board, Branson Airport LLC must meet monthly and quarterly revenue and enplanement benchmarks through June 30, 2012, or bondholders could take control of operations.
Airport officials missed a $1.65 million debt payment to bondholders on Jan. 3, triggering the need for a forbearance agreement, which serves as temporary relief granted by a lender that could legally foreclose on a borrower in default. The airport previously dipped into its reserves to make $3.78 million in debt service payments in 2010, and it took a $500,000 advance from private investors at the end of the year to pay operating expenses.
Operation benchmarks
According to the airport’s budget, enplanement projections range from 4,917 in April 2011 to 22,799 in June 2012. Total monthly operating revenue projections range from $413,673 in April to a high of $716,686 in October.
The forbearance agreement stipulates the airport meet at least 70 percent of its projected enplanements and revenues. The terms can be extended through June 30, 2013, should UMB and bondholders find that the airport meets its financial gates.
The move ends speculation that a restructuring of debt would be required for the airport that has lost $24.3 million since its May 2009 opening, according to its filings with the Municipal Securities Rulemaking Board.
Michael Hynes, an aviation consultant and operator of Hynes Aviation Industries in Branson, who reviewed the 54-page agreement at
www.emma.msrb.org, said the length of the agreement speaks volumes about the level of distrust between the bondholders and the operators of the only privately held commercial airport in America.
With a laundry list of termination clauses in the document, Hynes said bondholders are effectively telling the airport, “‘If you don’t meet these projections, it’s the end of the world.’”
Under Section 11 of the document, 15 criteria related to the outlined budget would terminate the contract within three days, and a total of 19 conditions must be met to not terminate the agreement within 30 days.
As part of the agreement, airport operators must place $3 million in its operating fund by June 11. The airport already received in April $500,000 from the bond trustee for the operating fund. However, Hynes said airport operators will then owe roughly $2.3 million in unpaid interest, leaving it precious little to run on, assuming they can gather the additional $2.5 million it needs to fulfill the terms of the forbearance.
The airport projects in its budget 127,122 enplanements between March and the end of the year, and 222,436 through 2012. The budget calls for $5.5 million in revenue between March and the end of 2011 and $9.8 million in operating revenues by the end of 2012. Calls and e-mails to UMB Bank for comment on the forbearance and funding agreement were not returned by press time.
Looking ahead
Though revenue and passenger counts have missed projections since opening in May 2009, Branson Airport CEO Stephen Peet said he is pleased to have the agreement in place, and he expects bright days ahead.
“However we got here, we are very pleased with the position we are currently in,” Peet said.
According to Springfield Business Journal archives, the airport recorded 48,575 enplanements between May 2009 and March 2010, while Branson Airport Executive Director Jeff Bourk said 250,000 enplanements were possible by the end of 2009.
Peet said the airport recorded roughly 92,000 enplanements in 2010, but he declined to comment on airport financials.
According to an unaudited income statement for the first quarter, which is said to be the slowest quarter of the year, the airport reported an operating loss of $4.4 million. Net losses in the first quarter of 2010 were $4.2 million, according to Municipal Securities Rulemaking Board filings.
Peet, however, appears focused on growing passenger and revenue figures. He said recently added flights and Southwest Airlines’ buyout of AirTran, which closed May 2, were positive signs for the company.
“We are now being served by a much larger airline with the combination of Southwest and AirTran, and that’s only a good thing for us,” Peet said.
Peet said AirTran was starting service this month to Chicago, Houston and Baltimore. Frontier Airlines also is adding service to Denver, and in July, seasonal flights to Milwaukee are scheduled to resume. “Airport enplanements in 2011 should be 50 percent to 60 percent higher than they were in 2010.”
In April, the Branson Airport announced it has joined forces with the Branson/Lakes Area Chamber of Commerce and Convention & Visitors Bureau and the Tourism Community Enhancement District to launch a $680,000 marketing campaign promoting Branson and AirTran Airways.
Hynes said he is doubtful that the airport can meet all the terms of the agreement. He said by the end of the year, the airport’s balance was only about $144,000. In March, the airport received another $500,000 from investors, but its balance at the end of the period was only about $61,000.
“They’d have better luck winning the lottery than meeting their projections,” Hynes said.
And though Peet seemed buoyed by the news of the AirTran buyout, there are no guarantees that Southwest Airlines would operate in Branson.
Southwest Airlines spokeswoman Laurel Moffat said the company has put together an integration team following the $1 billion buyout to decide how it will serve AirTran’s markets. She said it was too soon to say how the Branson Airport would be affected, but that load factors and demand would be considered during the evaluation period, which could take up to two years.
“It’s our intention to serve most, if not all, of AirTran’s markets,” Moffat said. “At this point, we haven’t made any firm decisions, yet.”[[In-content Ad]]
