An airport revenue bond refers to a debt instrument issued by an airport authority or a government agency to raise funds for the improvement, expansion, or maintenance of an airport facility. It falls under the category of municipal bonds, which are issued by state or local governments, and is specifically designed to finance airport-related projects.
Airport revenue bonds are secured by the revenues generated by the airport itself, such as fees for landing, terminal access charges, aircraft rentals, concession revenues, or parking fees. These revenues serve as collateral for the repayment of the bond's principal and interest. In essence, the bondholders receive interest payments and the principal amount at maturity from the earnings generated by the airport.
The issuance of airport revenue bonds allows airports to access much-needed capital without burdening taxpayers. The bonds are attractive to investors due to their tax-exempt nature and the relatively stable revenue streams associated with airports, as travel demand tends to be predictable over time.
The terms and conditions of airport revenue bonds, including interest rates, maturity dates, and redemption provisions, are outlined in a legal contract known as the bond indenture. Investors interested in airport revenue bonds typically evaluate the creditworthiness of the entity issuing the bond, considering factors such as airport management, financial stability, revenue generation potential, and future growth projections.
Overall, airport revenue bonds play a crucial role in funding infrastructure projects, enabling airports to enhance their operations and meet the increasing demands of air travel while generating income for bondholders.
