"Fewer passengers send Michigan airport looking for new sources of revenue"

Monday, September 10, 2001 

What will fly at airport?
Fewer passengers send airport looking for new sources of revenue
By Andy Henion
The Lansing (MI) State Journal


Capital City Airport, facing its lowest passenger count in eight years,
is looking into everything from golf courses to foreign trade zones to
boost sagging revenues.

Many development concepts are still on the drawing board. But airport
officials have decided to build two taxiways next year that would
connect the runways with land intended for prospective private aviation
or cargo-delivery companies. The businesses would pay rent and other
airfield fees.

The goal: Make up the hundreds of thousands of dollars lost with a 15
percent passenger drop-off. Three airlines -- American Eagle,
Continental Express and American Trans Air -- have pulled out of the
airport since May 2000, leaving just five carriers at a time when the
Lansing area is growing commercially and residentially.

"The airport needs to generate revenue and if we're not going to be able
to do it through passengers we're going to have to do it in other
areas," said airport finance chief Joe Micale. He estimates at least
$580,000 a year is being lost due to the airline departures and
passenger slide. 

The airport board voted recently to scale back a proposed $6.2 million
expansion of the baggage wing in favor of the taxiway project.

The taxiways, estimated at a combined $2 million, would be built next
summer on the terminal's east and west sides, said airport director Tom
Schmidt. While no companies have committed to moving in or expanding, he
said there is interest. 

"We have several people who have expressed a strong interest that if the
infrastructure is in place they would come in with a hangar," said
Schmidt. He would not name the potential customers. 

Airport officials had planned to build the taxiways in the years to come
but decided to move up the project to prompt growth, Schmidt said. It
will include the extension of sewer, water and other utility services.
Airport funds would pay 5 percent of the project, or an estimated
$100,000, with federal money picking up the lion's share.

United Parcel Service already operates a major delivery hub at Capital
City, while Jackson National Life, a Lansing-based insurance company, is
building a hangar there for its planes. The airport collects rent and
fees from the airlines and the dozen or so companies operating on the
2,100-acre airfield off North Grand River Avenue. Tenants include a
veterinary clinic and a billboard advertising firm.

Micale said the falloff in air travel threatens to strip about 10
percent to 15 percent of the airport's $5.8 million in yearly revenue.
The remaining airlines are making up some of that under an agreement to
share the fees of departed carriers. But the airport shoulders the
burden of decreased ticket fees and parking and concession income.

The lack of affordable seats has dropped Capital City behind Flint's
Bishop International as Michigan's fourth busiest airport, with Saginaw
a close fifth. Capital City is on pace to log 280,810 outgoing
passengers this year, the lowest since 1993's 280,529. In 1999 it had an
all-time high 367,619 boardings.

The airport was growing so fast in the mid-1990s that officials decided
to expand the aging baggage wing once they hit 400,000 boardings. The
$6.2 million project was slated to add a third baggage carousel and more
customer space.

The expansion is on hold until 2004 or "until passenger demand says it
needs to be done," Schmidt said. But the airport still will renovate the
baggage wing next spring for about $2.6 million, he said.

The scaled-back project includes replacing the two carousels -- which
are about 25 years old and prone to malfunction -- as well as a new
floor, ceiling and heating and cooling system, Schmidt said. The airport
again will pay 5 percent of the costs, or about $130,000.

Schmidt said one baggage device and the nearby rental car booths would
be kept open during construction. 

In another potential stab at development, the airport board recently
hired Grand Ledge consultant John Hanieski for $1,500 to explore the
possibility of getting the airport designated a foreign trade zone.

The zones, regulated by U.S. Customs, can improve a company's cash flow
and save it money. Customs duties and taxes are deferred on products and
materials imported into the zone for as long as they are stored there.
The charges can be reduced by assembling components into final products
in the zone. Also, a duty is not charged if the goods are re-exported or
shipped to another trade zone.

There are 240 U.S. communities in all 50 states with trade zones,
including six in Michigan: Detroit, the Grand Rapids area, Flint, St.
Clair County, Battle Creek and Sault Ste. Marie. 

Establishing a zone requires an in-depth government review process and a
processing fee of at least $4,000. A manufacturing plant or other
business also can be designated a subzone within the foreign trade zone.

The Battle Creek trade zone, established in 1978, covers the city's
industrial park adjacent to the airport, said zone manager Jan Burland. 

Many of the 95 businesses in the park are auto suppliers. Burland said
nearly a third of the companies there are foreign, including some from
Japan, Germany and Denmark.

The Battle Creek trade zone also has set up four subzones in nearby
communities for companies that make prescription drugs, infant formula
and other products.

Burland said seven companies used the trade zone benefits last year,
exporting $10 million worth of goods. 

"That has contributed mightily to the international commerce here," she
said.

Lansing airport officials and developers also have discussed putting a
golf course and a hotel on the airfield. But the struggling economy has
scuttled those plans for the time being. 

"With the slowdown in the economy it's kind of difficult for us to
pursue development opportunities," Micale said.

Passenger dropoff

Lansing's Capital City Airport has lost more passengers on average than
Michigan's other major airports, leaving local officials scrambling to
come up with ways to boost revenue.

Outgoing passengers through July 2001, change from 2000

Detroit Metropolitan, 8.4 million, -3.9 percent*

Grand Rapids, 564,989, +1.7 percent

Flint, 178,013, -0.2 percent

Lansing, 163,806, -15.5 percent

Saginaw, 154,496, -7.5 percent

Kalamazoo, 145,626, -4.9 percent

* Through June

Source: Michigan Department of Transportation

 Do you have an opinion about this story?
Share it with other readers in our CAA Discussion Forums

http://www.californiaaviation.org/cgi-bin/dcforum/dcboard.cgi?conf=DCConfID8

*****************************************