Denver Airport

Operating Results and Financial Risks Gao ID: AIMD-96-27 February 9, 1996

After reviewing available financial data and analyzing the risks associated with the financial condition of the new Denver International Airport, GAO has found no evidence that the airport will be unable to meet its financial obligations, including payments to bondholders. This report (1) analyzes the limited data available on actual results after the airport opened for operations in February 1995 and (2) identifies risks that could affect the airport's future financial condition. GAO also reviews estimated cash flow and the airport's cash reserves.

GAO found that: (1) predicting the future financial performance of DIA is difficult, since it has been operating for less than 1 year; (2) the difficulties in projecting DIA financial performance relate to the volatility of the airline industry, unexpected construction delays and costs, and the city of Denver's ability to repay airport investors; (3) the Securities and Exchange Commission is formally investigating the adequacy of the city's disclosure of information in bond documents with respect to delays in opening the airport; (4) there is no evidence that DIA will be unable to meet its financial obligations, since DIA has generated positive cash flows in its first 6 months of operation despite operating at well below capacity; (5) DIA debt service costs are expected to remain stable over the next 30 years, while operating and maintenance costs are expected to rise with inflation; and (6) as of September 1995, DIA had an operating cash balance of $57 million and held $420 million in reserve funds, of which $260 million could be used in the event of a financial crisis.



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