As non-essential travel has largely ground to a halt due to the coronavirus, the various arms of the transportation industry may see some difficulties maintaining revenues, according to Fitch Ratings.
Answering questions from investors about the future of the transportation industry, Fitch said the industry will face tests over the near future.
In specific, Fitch said airports will face a stiff test in the near term because their liquidity is dependent upon travelers paying as they go.
“Federal monies that airport can use for any lawful purpose and existing funds held in unrestricted reserves and construction accounts will soften the blow somewhat,” said Fitch Senior Director Seth Lehman. “That said, obtaining broad airline support will be more difficult until the aviation environment recovers.”
As a result, airports will likely defer expansion projects or scale back less essential projects to offset cash flow weakness.
Additionally, because the Centers for Disease Control (CDC) and Prevention’s “no sail order” has put a damper on cruise travel through mid-September, and will continue to put pressure on the cruise operator passenger levels through the end of the third quarter, investors want to know how these actions will impact ports, Fitch said.
“Ports are shielded to some extent thanks to minimum annual guarantees with cruise operators, though most cruise ports were operating well above their minimum annual guarantees level in recent years,” said Lehman. “Cruise lines at some ports invoked force majeure clauses under their contracts due to the coronavirus, which may provide cruise lines relief from meeting their minimum annual guarantee levels during their contract year if cruise operations are suspended for a long period.”
The reduction in cruise operations will also impact toll roads, Lehman said.
“Lower cruise demand will undoubtedly have an effect, but it is doubtful it would be sufficient in isolation to lead to negative rating actions for toll roads,” said Lehman. “Regions that serve large numbers of cruise passengers like Miami and Fort Lauderdale have a significant tourism component to their economies, but tend to be midsize to large and growing with increasingly diverse economic activity.”