Branson Airport signs third debt-service extension

The owners and operators of Branson Airport were optimistic when it opened five years ago as the country’s only privately funded commercial airport. At the time, Branson Airport LLC CEO Steve Peet – who also is a key investor – projected 1.5 million passengers by its fifth year in operation.

Public filings reveal severely lowering expectations. The latest came Sept. 22, when airport officials secured an extension of its funding and forbearance agreement, according to records with the Municipal Securities Rulemaking Board.

In the amendment approved by bondholders and bond trustee UMB Bank, its third since a 2011 debt-service default, airport officials project some 73,600 passengers will fly in and out of its gates this year.

Before the exit of Dallas-based Southwest Airlines (NYSE: LUV) in June, airport officials had anticipated revenue of $8.3 million this year with total passengers at more than 178,000. Airport officials signed startup Buzz Airways to supplant the low-cost carrier this year.

“What is Plan B? There is no Plan B,” said Branson-based aviation analyst Michael Hynes of Southwest’s successor and the bondholders’ agreement to new debt-service terms. “What other option do the bondholders have?”

The investors could take over the property and auction off the airport, Hynes said, but it is probably smarter for most to write off losses today and hope the airport corrects its course.

“They’d gain an airport, and they don’t want an airport,” Hynes said.

CEO Peet, who declined an interview for this story, had worked with fellow investors to garner nearly $115 million in municipal bonds used for the construction of the $148 million airport that opened in May 2009. Fellow airport investor Glenn Patch of Titusville, Fla.-based GEP Inc., and former owner of the ’57 Heaven Auto Museum in Branson, could not be reached for comment on the most recent extension.

Known by airport code BKG, the airport’s current financial position on paper puts annual revenue at $4.56 million, not including interest and depreciation, with net cash flow of $653,481 in large part due to Southwest’s early year activity and the airport’s pay-for-performance agreement with the city of Branson.

BKG expects a 2015 operating loss of $1.33 million on $3.35 million in revenue, with total passengers projected to land at 94,248.

With activity from Southwest appearing to lead a turnaround for the financially strapped airport, the company posted $3.9 million in net operating income in 2013 – not including depreciation or interest expenses – but that followed $21 million in combined net operating losses through its first four years in business.

Complicating the financial matter is an apparent shift to wholly seasonal commercial airline traffic. According to budget projections filed with the MSRB, no commercial passengers are expected November–May. Frontier Airline’s seasonal service ended Oct. 25, and startup Buzz Airways and charter carrier Branson Air Express are seasonal, as well.

BKG and its Jet Center will continue to be a stopping point for cargo planes and private jets this winter.

Analyst Hynes has followed the airport’s efforts to gain traction with flyers in the tourist-driven city since it opened. He is optimistic BKG will remain open but only with extended support of investors.

Hynes, who runs Hynes Aviation Service Industries, estimated the airport could need as much as $4 million to $5 million per year over the next eight to nine years to keep the airport afloat and help grow service based on current activity.

He said BKG is spending too much on marketing and a line item called “extra ordinary marketing” – which he believes could be money paid to carriers per flight to keep service in Branson – compared to its total revenue. In 2015, the marketing lines represent projected expenses of more than $877,000, compared to total revenue of $3.35 million.

“Those numbers don’t work. That’s what they were doing years ago and that’s why they were losing $8 million to $9 million a year,” Hynes said. “You’ve got to do something, but there has to be a limit to how much money you put in the pot.”

Another complication noted by Hynes is that across the country there aren’t enough planes to go around.

“Everyone is running out of airplanes,” Hynes said, adding the backlog on orders for new 737s is around eight years.

A lack of planes and new gate opportunities on the East Coast are considered major reasons why Southwest opted to leave Branson after 15 months in the market, according to Hynes and other analysts.[[In-content Ad]]