Passengers on U.S. airlines could see higher airfares as carriers pass along rising rent and landing fees stemming from airport renovation and expansion projects.
That outlook comes from Moody’s Investors Service, which warned that large-scale investments at major hubs — including Los Angeles International, New York’s John F. Kennedy and Newark Liberty International — will drive up operating costs for airlines.
Moody’s projects that rent and landing fees will increase roughly 25 percent by 2021, and about 32 percent at the nation’s 25 largest airports.
“These increases are manageable and should be able to be recovered through higher fares,” the credit‑rating agency said, noting that carriers are likely to pass much of the added expense onto travelers.
Delta Air Lines is expected to be most affected, with fees forecast to climb about 39 percent over the next five years. Other major carriers, including American, Southwest and United, are likely to face similar upward pressure on costs.
To cover the higher expenses, airlines may turn to additional borrowing. Moody’s expects that some carriers will raise debt to fund operations and manage cash flow while absorbing increased airport charges.
“Much of the growth in enplanements has been driven by airlines using larger planes,” said Earl Heffintrayer, vice president and senior analyst at Moody’s, the author of the report. “Larger planes need expanded terminal and runway space, which is driving the capital expansion.”
Airport authorities have been investing in larger gates, extended runways and upgraded terminals to accommodate growing passenger volumes and bigger aircraft. While these improvements can enhance the travel experience and increase capacity, they also require significant capital that airports often recoup through higher fees charged to airlines.
Airlines then face a choice: absorb those higher costs, cut spending elsewhere, increase ticket prices, or finance the gap through borrowing. Moody’s assessment suggests a mix of these responses, with fare increases being a practical channel for recovering some of the added expense without immediately undermining airline credit profiles.
For travelers, the most visible effect may be incremental fare increases over time, especially on routes that operate from the busiest airports undergoing construction. Business and leisure passengers alike should expect airport-related charges to be a contributing factor to airfare trends in the coming years.
Industry analysts will be watching how airports structure their fee increases and how airlines balance pricing, capacity and financing choices as major airport programs move forward.