Thanksgiving Travel and Investment Opportunities: Why Airports Are the New Frontier
As millions of Americans prepare to travel for Thanksgiving, those heading to airports are likely to navigate a flurry of activity both in the skies and on the ground. Amid the bustling holiday travel season, savvy investors might find a unique opportunity hidden among the crowds—an opportunity that the Extreme Investor Network wants to highlight this holiday season.
Record Travel Numbers and Infrastructure Needs
According to the Transportation Security Administration (TSA), this Thanksgiving is anticipated to be one of the busiest travel periods on record, with an estimated 18.3 million people screened from November 26 to December 2. This significant increase denotes a 17% rise in passenger volumes compared to last year. Yet, amidst this surge in demand for air travel, it’s worth noting that there hasn’t been a new commercial airport built in the U.S. in over five decades.
This has created a pressing need for the renovation and expansion of existing airport infrastructures—think larger terminals, more runways, and additional amenities. Daniel Close, head of municipals at Nuveen, emphasizes this shift, pointing out how modern airports are evolving. “Your terminals are now an Amex Lounge, a Chase Sapphire Lounge, and so many more options,” he explains. The growth of passenger amenities highlights how investments in airport infrastructure are becoming more critical than ever.
Municipal Bonds: A Smart Investment Choice
One of the most effective ways to finance airport expansions and upgrades is through municipal bonds. These bonds have historically been favored by high-income investors, as the interest they accrue is often exempt from federal taxes—and even from state taxes if the bond is issued in the investor’s home state.
The numbers speak for themselves: U.S. airports have issued approximately $18.2 billion in revenue bonds as of October 2024, marking a remarkable 25% increase compared to all of 2023. Close foresees that this momentum will likely persist, making now an opportune time for investors to enter this space.
“With this type of supply, it tends to cheapen the market, creating an attractive entry point for new investors,” he states, making a case that savvy investors should consider allocating a portion of their portfolios to airport revenue munis.
The AMT Factor: More Yield with Less Risk
One of the key considerations for investors in this sector is the alternative minimum tax (AMT) implications. Thanks to the Tax Cuts and Jobs Act, many investors have found themselves unaffected by this tax, leading to significant opportunities for yielding returns. Close notes that purchasing bonds with AMT preference could provide investors with an additional 30 to 50 basis points in yield potential.
Now, while it’s essential to be cautious given the leverage many airports carry (which can sometimes adjust their credit ratings from AAA to A- or AA-), the fundamentals remain sound. Many of these airports boast robust cash reserves and well-defined revenue streams, making them investment-grade contenders worth serious consideration.
What Nuveen Looks For: The Ideal Airport Investments
When evaluating airport revenue bonds, Nuveen’s investment strategy focuses on several crucial factors:
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Demographics: Airports located in rapidly growing regions significantly increase their chances of generating revenue through higher passenger volumes.
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Carrier Diversity: A broader mix of airlines at an airport signals stability and reduces risks associated with reliance on a singular carrier.
- Strong Financials: Airports need enough liquidity and reserves to handle operational disruptions and meet any future capital expenditure plans.
In this context, highly-rated airports like LaGuardia, JFK in New York, and Dallas Fort Worth International are being rolled into Nuveen’s All-American Municipal Bond Fund.
A Novice? Consider Muni Bond Mutual Funds
While purchasing newly issued bonds directly can be a daunting task, many investors opt for municipal bond mutual funds for broad exposure. This approach can help even novice investors to diversify and mitigate risks effectively while benefiting from professional management.
Conclusion: A Holiday Investment with Long-Term Growth Potential
As Thanksgiving approaches, the travel landscape paints a compelling picture of both community and prosperity. Investors who take the time to look beyond holiday festivities should find a world of opportunity in airport infrastructure—an area primed for growth and stability in turbulent times.
So, as you prepare for your travels, consider how your investment strategies can align with this booming sector. In partnership with the Extreme Investor Network, we aim to guide you through the intricacies of smart investing, ensuring that you’re well-equipped to make informed decisions and reap the rewards of this evolving market.
Happy Thanksgiving and prosperous investing!
This blog post not only aims to provide readers with valuable insights but also emphasizes the community-oriented approach of Extreme Investor Network, ensuring that our audience feels empowered and informed.