Fitch downgrades toll road bonds, outlook bleak

Link to article here. Add to the Fitch Report this story in the Austin Business Journal about how vulnerable Texas drivers are to high gas prices, taking 6% of one’s income (tolls could easily double one’s gasoline cost), it’s malfeasance for politicians and their political appointees to continue to push toll roads.

Toll road and airport projects are now riskier
By Pat Driscoll
August 20, 2008

High fuel prices, inflation and a dragging economy have made bonds for toll roads and airports riskier, Fitch Ratings said in a report today.

toll.traffic.jpgWith tollway and airport traffic down as much as 16 and 19 percent, respectively, the report said the outlook for tollways and airports is now negative, down from a stable assessment just five months ago.

“The question is whether the current trend will continue for a longer period,” it states. “It is Fitch’s view that challenging conditions will persist over the next one to two years.”

Though fuel prices have been dropping from last month’s record, the economy and credit markets remain troubled and Europe and other countries show signs of stress, the report explains. Besides, food and other commodities haven’t joined the fuel-cost slide.

Not mentioned is that the U.S. Energy Information Administration expects even higher gas prices next year, and a debate slogs ahead on whether global oil production has peaked — and if not, then when — and how well technologies and alternative sources can fill the gap. Many agree that the age of cheap energy is over.

If pressures continue, and policymakers start pushing more money to public transit and more people begin shunning suburbs to live in urban cores, toll roads will face bigger problems, the report says. Airports could lose 10 percent of capacity within several years.

The report’s title rings ominous: U.S. Transportation Assets: Facing a Temporary Decline or a Permanent Change?


Most U.S. toll roads now face traffic losses of 2 to 10 percent, says the Fitch report, which tracked numbers through June. Operators may have to boost rates and cut costs to keep bond ratings healthy, which might be difficult, even more difficult for private concessionaires charging maximums allowed in contracts.

Texas toll hopes, though, aren’t as bleak.

“Facilities in Texas appear to be a bright spot, with year-on-year reductions of less than 5 percent, which is half of what most other facilities in the Northeast, Midwest, Southeast and the West are experiencing to date,” the report says.


Seats on domestic flights could be down nearly 8 percent in the last quarter of 2008 compared to a year ago, the Fitch report says. Major airport hubs will fare better, losing only 6 percent.

Some airports could grow mostly because Southwest Airlines continues to expand, it says. San Antonio International Airport, where Southwest is by far the biggest carrier, saw record months in May and again in June. But several airlines, including Southwest, recently announced they will pull back some flights here.

Most U.S. carriers plan to cut capacity 6 to 14 percent in the third and fourth quarters of this year, Fitch says. Airports in the middle of big projects, such as San Antonio’s huge expansion, will likely have less flexibility to weather any financial storms.

2 Replies to “Fitch downgrades toll road bonds, outlook bleak”

  1. JK

    Some toll road insiders fear that, along with the potential for lessening traffic volumes due to the high price of gasoline, there will be a sharp increase in attempts to circumvent paying the toll itself. The thought is that the number of “toll road cheats” might increase as much as three to four percent, which is a significant number. It would appear a number of toll road administraters are considering ways to bolster their violation enforecement systems (VES) to stay ahead of this potential threat.

    Airlines and airports seem to welcome anything to which they can attribute losses in their declining revenues. General aviation has been steadily losing ground to the executive charter flight market over the last several years with the greater percent of previousl first class ticket purchasers, and a good deal of full-fare passengers, having made the switch according to a recent insightful article in the Economist. It is likely that the increase in air fare coupled with the poor service expectations and the long delays experienced at airports has actually increased toll road traffic. Business travelers have already learned that the required early arrival for departing flights and the poor record for on time take-offs with the resultant missed connections make driving a viable alternatives for longer and longer drive times.

  2. JK

    Many toll road operators are concerned that the increase cost of travel caused by the rising price of gasoline will cause an increase in the number of drivers attempting to thwart the payment system on toll roads. It is possible that the number of “toll cheats” could increase as much as three or four percent, a significant number. Considerations are underway on some roads to bolster the violation enforcement system (VES) by upgrading outdated systems used to capture license plate information from those vehicles in violation of the payment process.

    Airlines and airports have been in difficulty prior to the current oil price crisis and seemingly look to new reasons to justify the poor financial conditions they are experiencing as they appear. An article in the Economist recently provided insight into the losses that general aviation has experienced over the last several years to the executive jet segment. The number of previous first-class and full-fare ticket buyers that have moved to the executive jet charter services has been crippling to the regular carriers. Business travelers long ago discovered that, along with the required early arrival at the airport for flight departures, the poor on-time departures with the resultant missed connections makes longer and longer driving distances more and more acceptable. Tolls for those trips are inconsequential at that point.

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