A new Manchester airport, expected to be completed within the next two years using the proceeds of $42.5 million state-guaranteed bonds priced last week, will take advantage of a largely untapped reservoir of air travelers, an administrator said yesterday.

"Market penetration is really very low, and that is because many airlines look at this as an extension of the Boston airport, and they're wrong, totally wrong," said Alfred Testa Jr., director of the Manchester Airport. "This is a separate and distinct market, and as such, has tremendous potential for those airlines interested in serving it."

The new, 158,000 square foot terminal will replace a 42,000 square foot air terminal. A larger terminal will also make the Granite State more hospitable to business considering a move to New Hampshire, according to Martha Austin, press secretary for Gov. Judd Gregg. "One of their first questions always is, what kinds of transportation facilities do you have?" she said.

Proceeds of the bonds, which were priced by a PaineWebber Inc. syndicate and issued through the state's Business Finance Authority, will be supplemented by $26.2 million in federal funding and $5.1 million in airport revenues.

Based on the state guarantee, Moody's Investors Service, Fitch Investors Service, and Standard & Poor's Corp. all rated the bonds double-A, the same as they rate the state's bonds.

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