DEFINITION of 'Airport Revenue Bond'

A bond issued by a municipality or airport authority that uses the revenues of the airport facility to back the bond. An airport revenue bond is tax-exempt and is typically issued when a municipality or airport is looking to expand its facilities or pay for upgrades. Because this debt is issued by a municipality or airport authority it is more likely to have a lower interest rate, making the long-term financing costs for the airport lower.

BREAKING DOWN 'Airport Revenue Bond'

The tax-exempt status of an airport revenue bond may depend on the airport's mix of public and private use. The more an airport is used for private purposes rather than public, the less likely the bond will offer the full extent of tax-exempt options. The rating of this type of bond by credit analysts is dependent on the amount of traffic the airport receives, how well the airport performs financially and how likely it is that airlines will continue use the facility.

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