… Ahead of Anticipated U.S. Recession

Moody's Investors Service, known colloquially as Moody's, is a bond credit rating concern providing international financial research on bonds issued by commercial and government entities. Moody's, along with Standard & Poor's and Fitch Group, is considered one of the Big Three credit rating agencies.

The company, which made 2021’s Fortune 500 list, ranks the creditworthiness of borrowers using a standardized ratings scale which measures expected investor loss in the event of default.

Among the cryptic auguries set forth by Moody’s is a report in which the company portends the operational and economic wellbeing of U.S. airports and ports. On 07 December 2022, Moody’s posited that the 2023 outlook for subject facilities was stable—ahead of an anticipated U.S. recession. The report marks a change from 2022’s positive assessment, and reflects Moody’s expectations that a worsening macroeconomic environment and airline capacity constraints will negatively impact passenger traffic growth, and slowing global economic growth will reduce cargo demand, thereby weakening revenue for U.S. ports.

Moody's Investors Service assistant vice president Ursula Cassinerio stated: "Airline traffic is increasing but unevenly throughout the year, from a low base and less so than it would in a more favorable environment. This baseline is then coupled with staffing shortages, high airfares, and limited disposable income, among other difficulties for passengers, creating a hindered starting line for U.S. airports in the 2023 marathon.”

Moody's vice president and senior analyst Moses Kopmar adds: "Port cargo volume will grow at a lower rate—between 0% and 2% in 2023, down from 3% in 2022—as economic growth decelerates and recession risks mount. Cruise, which is a meaningful business for a select number of ports, will continue to benefit from strong demand. Port volumes and revenues are record levels and balance sheets are strong, positioning the sector to manage a slowdown in traffic and declining earnings among key customers. Supply chain pressures have eased but will linger in 2023, with ongoing risks stemming from labor relations."

Moody’s asserts economic growth is decelerating rapidly, and cites the risk of deeper-than-expected contraction in the U.S. in 2023. The firm contends that a return to a positive outlook for U.S. airports is contingent upon the manifestation of signs that macroeconomic and business conditions are improving to degrees commensurate with steady, sustained passenger traffic growth in the coming 12 months. Conversely, the outlook could wane negative if the coming year sees a decrease in anticipated passenger traffic resultant of airline capacity constraints and worse-than-expected economic conditions.

FMI: www.moodys.com