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"Capital projects at Louisville Airport proceed; officials keep eye on security costs"

Monday, June 17, 2002

Capital projects at airport proceed; officials keep eye on security costs
Airport authority plans to begin terminal renovation this fall
By Brent Adams
Business First of Greate Louisville (TN)

For more than three decades in the airport business, Jim DeLong always has
tried to find a balance between pleasing airlines, travelers and community

Throw in the complications brought about by the Sept. 11 attacks, the
general manager of the Louisville and Jefferson County Regional Airport
Authority said, and he faces the toughest juggling act of his career.

After Sept. 11, DeLong and members of the airport authority board had to
delay plans for several projects that were part of the airport authority's
planned $345 million capital-improvements project at Louisville
International Airport and Bowman Field.

"We went forward with those projects that could deliver a steady income
stream once completed or were safety related," DeLong said, referring to
projects such as a recently completed facility for the U.S. Department of
Customs and a nearly completed $2.5 million fire and rescue station.

"We also went on with airfield improvements that we knew would be covered by
landing fees paid by the airlines."

DeLong said 30 T-hangars were completed at Louisville International. He
estimated that those hangars, which were opened last month, are 70 percent
to 80 percent leased.

"We were confident that those could be leased pretty easily, so we decided
to move forward with that project," DeLong said.

Projects that were put on hold included the $1.5 million construction of 30
T-hangars at Bowman Field and construction of an international arrivals
facility at Louisville International.

Also, a $25 million renovation of the terminal at Louisville International
was put on hold while modifications were made to the design in order to
comply with new safety regulations set by the federal government.

"We have the income stream to move forward with the terminal renovation,"
DeLong said. "But the new security requirements that were handed down (by
the Federal Aviation Administration) after 9/11 forced us to completely
revisit our plans."

DeLong said new plans for the renovation are being prepared by the
Washington, D.C., and Los Angeles offices of architectural design firm
Gensler Inc. and are expected to be complete within the next few weeks.

Following review by a panel consisting of four independent architects and
interior designers, the plans will be turned over to Louisville-based
engineering firm Qk4, which will translate the drawings into blueprints for
construction, DeLong said.

"I would expect to break ground in September, and by spring of 2004, the
terminal will have a totally different look," DeLong said. "My board and I
believe this is an important project because an airport is really the
gateway to your city and your state, and we want to renovate the terminal to
bring out the true spirit of Louisville and Kentucky."

DeLong said the terminal will receive new flooring, lighting, airline
counters, signage and art displays that reflect the architecture of the
Greater Louisville region.

Lou Bottino, senior vice president of Paradies Shops Inc., the Atlanta-based
company that operates 10 gift shops and newsstands at Louisville
International, said that he believes that the cosmetic touch-ups to the
airport will be well-received.

He said he doesn't believe the planned renovation work will decrease the
shops' business volume, which has increased steadily since falling off after
Sept. 11.

"The only way that (the renovation) will hurt our business is if it somehow
changes the way traffic flows through the terminal, but I don't believe that
will be the case," Bottino said. "The cosmetic changes to the airport will
only work to enhance what is already there."

New gates planned for regional jets

The renovation will include the $8 million construction of six regional jet
parking positions, 20 aircraft gates for narrow-body and regional jets and
two gates for wide-body aircraft.

DeLong said that when the two-story gates are in place, passengers boarding
regional jets will be able to put their bags on a scissors lift that will
transport the bags to the jet.

Currently, passengers must walk onto the tarmac to board the plane and hand
their bags to an airline employee, who places them in a cargo hatch. Upon
deplaning, passengers wait on the tarmac for their bags to be unloaded.

"The current system is fine when it's sunny and 72 degrees, but it isn't so
fun when it's raining or snowing," DeLong said.

Memphis airport faces challenges, too

Larry D. Cox, president and CEO of the Memphis, (Tenn.) Shelby County
Airport Authority, said that after Sept. 11, the airport authority was
forced to halt several projects included in a $200 million
capital-improvement plan.

Capital-improvement projects at Memphis International Airport are divided
into two categories -- airfield and taxiway improvements and
passenger-services projects.

Cox said work on the airfield and taxiway projects continued, but that plan
and design work was put on hold for passenger-services projects, including
the addition of new gates at the terminal, improvement of parking facilities
and road infrastructure and a consolidated transportation center that would
have housed the operations of all of the airport's rental car companies.

"There's not much under way right now," Cox said. "But we are beginning to
dust some of those projects off and look at revisiting them."

Cox said plans for renovation of the terminal and parking facilities are
being redesigned and that the biggest question mark now is the electronic
detection equipment that the U.S. Transportation Security Administration is
considering requiring for commercial airports.

"We feel confident that we have enough information (on federal safety
requirements) to move forward with our projects," Cox said.

Cincinnati airport work has progressed

Northern Kentucky International Airport in Hebron, Ky., where Ted Bushelman,
director of communications, said capital improvement projects were not put
on hold after Sept. 11.

Bushelman said work began in May on a third north-south runway and
construction continues on a new fire station.

He added that shipping company DHL International Ltd., which has a hub at
the airport, is in the midst of a facilities expansion project, too.

Bushelman estimated that ongoing capital improvement projects at
Cincinnati/Northern Kentucky International total about $500 million.

"Because of the nature of the projects, we didn't feel like there was any
reason to put them on hold," Bushelman said. "Our attitude is `whatever has
to be done has to be done,' and we're not cutting back."

Bushelman acknowledged that the airport's security costs have risen since
Sept. 11, but he said airport administrators are taking the situation in

"Our costs have risen, but we accept those costs and go on with it because
we know there's not much we can do about it," Bushelman said. "The bottom
line is that people just want to be secure, and we need to do all we can to
provide that security."

U.S. airports return attention to projects

Tom Browne, managing director of aviation infrastructure with the
Washington, D.C. -based trade association Air Transport Association of
America Inc., said that more airports across the country are beginning to
blow the dust off capital improvement plans that have been on the shelf
since Sept. 11.

"With an increase in passenger and carrier demand, we are seeing more
airports consider a return to their capital improvements," Browne said.
"What we are concerned about is that money to complete many of these
programs could potentially be sucked up by increased security costs.

"What we are telling airport officials is that they should approach both the
capital improvements and security projects with extreme caution," Browne
added. "Let the TSA determine security needs and requirements before jumping
into projects or else you may wind up having to redo something six months or
a year down the road."

Security needs add to financial concerns

As with Memphis International, security became a primary focus at Louisville
International after Sept. 11.

At the airport authority's last board meeting, held May 15, an estimate of
security costs was distributed. The costs, which DeLong said are yet to be
funded, include $13.4 million for interim baggage screening, passenger
checkpoint screening and baggage security screening equipment, and another
$13.3 million for related facilities.

DeLong said the board will seek funding for the security improvements from
the airlines and the federal government.

"Before Sept. 11, the airlines were spending approximately $650,000 per year
for security, and we were spending $150,000," DeLong said. "Currently, the
airlines are spending $3 million per year, and we are spending about
$750,000. In the future, those combined costs could reach upwards of $15
million or $20 million as the federal government takes over.

"The airlines are absorbing some of that cost, but I've also had to instruct
my staff to freeze hiring, reduce costs wherever possible and limit spending
in order to keep things in check."

According to April 2002 figures provided by the airport authority, the
authority posted net income of $24.6 million for the previous 10 months to
date, on total operating revenue of $43.5 million. That is compared with net
income of $35.9 million on operating revenue of $43.5 million a year

A total of 778,110 passengers passed through Louisville International in
January, February and March, which is down 11.4 percent from the same period
a year earlier. In April, Louisville International saw 288,915 passengers, a
12.8 percent decrease from a year earlier.

"Sept. 11 changed the way we look at everything around here," DeLong said.
"Air travel is down, and the airlines are hemorrhaging.

"I think the decline in travelers has had more to do with the economy than
the threat of terrorism, especially when it comes to business travel," he
added. "However, every time you have new threats (of terrorism), there is
going to be an adverse impact.

"From our standpoint, we've got to do everything we can to assure travelers
that we have done all we can to ensure their safety," DeLong said. "At the
same time, we have to answer to our airlines who are trying to slash costs
to the bare minimum and our travelers who want the most value for their
dollar. It's a delicate balance."

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