Although it may take years until Denver International Airport fully bounces back from the pandemic, Colorado’s largest economic engine — responsible for generating more than $33.5 billion for the region annually — is positioned to do so quicker than most, airport officials reported Thursday.
“It could be the end of 2023 before we’re back to 2019 levels of traffic," airport CEO Kim Day told Denver City Council members during budget hearings Thursday. Nevertheless, she said, the airport continues to "lead the nation by about 10% in terms of recovery."
Heading into 2021, the airport plans to maintain a solid debt service coverage ratio of 1.25 and a goal of at least 500 days of cash on hand. DIA is also working to keep the cost of its carriers competitive, Day said, to “incentivize them to continue to invest and grow in the Denver market.”
DIA will approach 2021 from a “good position,” Day assured council members, “because over 95% of our traffic is domestic, and domestic traffic is what is thriving right now.”
The airport is an enterprise organization within the city of Denver, meaning it is not funded with tax dollars or the city’s general fund dollars. DIA issues its own bonds and pays debt with the two types of revenues it generates: airline and non-airline dollars.
By the end of this year, DIA expects to see a 40% decline in passenger traffic, or about 41.4 million passengers, compared to last year, drawing in a revenue of $690 million.
Next year, the airport is expecting to recover from this year’s baseline by about 5%, generating an estimated $850.7 million.
Airline revenues are projected to increase from 2020 levels by 4.5% and represent recovery of cost, meaning they are “less sensitive” to changes in passenger volume.
“That said, all our airlines that lease gates at [DIA] have indicated to us unequivocally that they plan to continue to lease space that they currently have or plan to have,” airport interim chief financial officer George Karayiannakis said.
Non-airline revenue, on the other hand, which largely depends on passenger spending, is projected to plummet next year by about 45% compared to this year’s revenue. Those dollars are generated through things like parking concessions and rental car revenues.
Still, the rental car business is proving to be profitable at DIA, officials reported, with $33.1 million generated year-to-date.
“We were expecting that for the whole year we could get $32 million, so even if September through December isn’t as good as expected, we’re still better than the base case that we originally thought we would be in,” Karayiannakis said.
Day suspects rentals are doing fairly well because “people like the fact that they can control their space. They’re not in an environment where they have to wear a mask on the bus or something.”
Although optimistic, DIA is approaching next year cautiously, “staying nimble, in case a second wave hits the industry hard,” Day said.
The airport plans to reduce its personnel budget by $1 million next year by maintaining its hiring freeze of “nonessential” positions and keeping vacant any positions left open by employees who exit through the special retirement incentive program. Those budget cuts do not include the 2021 furlough days scheduled for DIA employees that officials estimate will save an additional $2.5 million.
Additionally, DIA will tighten the belt on its services and supplies budget by $18.6 million.
“While we have decreased the amount we expect to spend on top contracts, we are also cognizant that passenger traffic may come back stronger than what we were contemplating and, as a result, want to make sure that we are ready for that possibility,” Karayiannakis said.
The airport’s proposed budget for 2021 is a “conservative one,” Day told council members, crafted to be “scalable and flexible.”
Cushioning the blow of the pandemic is about $269 million the airport received in coronavirus relief funds, which DIA has applied to debt service and will continue to spend over the next few years as needed, according to Karayiannakis.
In August, the rating agency Standard & Poor's affirmed the airport's credit ratings at A+ for senior bonds and at A for subordinate bonds.
“To our knowledge, we have been the only airport in the country to have our credit rating affirmed during the pandemic,” DIA spokeswoman Emily Williams told Colorado Politics.