Fitch: Solid airport traffic trends, but trade tiffs spur uncertainty

US ratings agency Fitch believes solid airport traffic airport performance posted by US airlines in 1H2018 should continue for the remainder of the year, albeit at a more moderated place.

In its 2018 midyear outlook for US transportation and infrastructure, Fitch stated overall US air passenger growth is tracking above the 3% range forecast at the the beginning of the year. The company believes positive growth trends should continue throughout 2018 although at more temperate levels.

“Large hub airports still remain the leading performers, but mid tier and smaller regional airports are also showing favourable performance,” said Fitch. The agency highlighted capital programmes and associated borrowings are rising, with private partnerships gaining traction.

There are some sensitivities to Fitch’s outlook. The agency stated near term economic trends are favourable, with moderate GDP growth of 2.8% accelerating in 2018 from 2.3% in 2017 driven by positive business sentiment, strong external demand, recent tax changes and fiscal stimulus.

However,  Fitch warned: “Longer term trends are more uncertain due to potential shifts in US economic and trade policies.”

Noting the Trump Administration’s pursuit of significant changes in trade policy and threatened implementation of tariffs on a rage of goods and countries, Fitch cautioned a “trade war may ensue if retaliatory tariffs are subsequently enacted”. Canada, China, Mexico and the EU have all responded to the administration’s tariffs in some fashion. As the tariffs the President Trump imposed on China took effect in early Jul-2018, global financial markets have performed somewhat sluggishly.

Fitch also remarked that rising oil prices have not had a material impact of the US transportation sector, but concluded: “further material and sustained increases could lead to revenue pressures.”