Fitch says 'fiscal cliff' could hurt air travel

Fitch warns that 'fiscal cliff' would hurt air travel as much as 5 percent

Associated Press

NEW YORK (AP) -- The number of airline passengers could drop by as much as 5 percent, if a mix of spending cuts and tax increases takes effect at the beginning of 2013, Fitch Ratings wrote in a report on Monday.

Fitch said that 20 years of air traffic data suggest that passenger volume will be flat to down 5 percent, if the so-called "fiscal cliff" scenario happens.

Airlines routinely see traffic rise and fall with the nation's economy. And airports are major borrowers, so bond investors track airport trends closely.

Fitch analyst Michael McDermott wrote that a fiscal cliff scenario would essentially erase economic growth in 2013, pushing unemployment from 8 percent today up to 10 percent by 2014. "Such a slowdown and the resulting unemployment could significantly affect demand at transportation facilities," McDermott wrote.

The ratings agency is not predicting that the automatic spending cuts and tax increases will happen. It said it expects that the U.S. economy to grow next year by 1 to 4 percent in the airport sector.

Fitch noted that in the last recession, traffic at airports focused on leisure travelers fell 2 to 8 percent. They would likely fare worse in a second recession, McDermott said.

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