Sky Harbour Secures New York Stewart Airport Expansion, But Execution Risks Loom

What happened

Sky Harbour Group announced a lease amendment with the Port Authority to expand its development site at New York Stewart International Airport from 16 to 26 acres, adding approximately 150,000 square feet of rentable hangar space. This move aligns with the company's strategy of building standardized hangar campuses on long-duration ground leases in supply-constrained aviation markets. However, the DeepValue report highlights that Sky Harbour's valuation is rich with a P/S over 40x on $14.8 million 2024 revenue, and operating results remain loss-making, driven by non-operating warrant gains. The expansion at SWF represents progress on a key watch item—airport authority approvals—but does not address core risks like construction delays, financing costs, or lease-up challenges. Investors should view this as incremental, with the overall thesis still hinging on converting development spend into stabilized net operating income across multiple sites.

Implication

The increased acreage and hangar square footage at SWF could boost future rental revenue, supporting the long-term growth narrative based on scarcity-backed airport leases. This approval reduces execution risk related to airport authority relationships, a positive step noted in the DeepValue report's watch items. However, Sky Harbour still faces significant challenges, including construction cost inflation, schedule delays, and reliance on bond and equity financing that could lead to dilution. The company's operating losses and rich valuation relative to current scale necessitate caution, as financial performance remains tied to non-operating gains rather than core operations. Until multiple campuses stabilize and deliver consistent NOI, the expansion alone is insufficient to justify a rating upgrade, emphasizing the need for continued monitoring of execution milestones.

Thesis delta

The SWF expansion is a positive development that addresses one of the watch items for potential stance improvement, specifically airport authority progress. However, it does not materially shift the core thesis, as Sky Harbour's rich valuation, operating losses, and persistent execution risks around construction and financing remain unchanged. A shift to a buy would require sustained evidence of rental revenue acceleration and on-budget project deliveries across multiple sites, not just incremental site expansions.