"U.S. Airports Look at Ways to Survive"

Tuesday, September 16, 2003

Airports Look at Ways to Survive
The Fort Worth (TX) Star-Telegram


TAMPA, Fla.--Airports must build themselves up to serve all comers, not just
hometown or flagship airlines, officials with the Airports Council
International said Monday during a wide-ranging discussion of how to best
navigate the recovery of the travel industry.

Officials said airlines need to work with airports rather than bicker over
operating costs or mounting debt payments for projects.

And airports need to become less reliant on dominant carriers, officials
said.

"The airline industry is under great siege, working with financial models
that are clearly broken," said David Plavin, president of ACI in North
America. The council is having its annual conference in Tampa. "As we go
down the road, we're hoping the airline industry will cool its silly
rhetoric."

So far, "they've come to the airports and said, 'We're going into the
toilet; you need to go with us,' " he said.

The council is the primary advocacy group for airports.

Airport fees and charges constitute 5 percent of the cost of doing business
for North American airlines, said Roland Dorsay, president of the Canadian
Airports Council.

In other words, to cut airlines' charges by 1 percent, an airport would have
to make a 20 percent cut in its own budget.

Many airport officials say they are feeling great pressure to do just that:
to cut operating costs -- and expansion projects -- to help keep fees low
for tenant airlines.

"It's something we're really wrestling through," said Gina Marie Lindsey,
managing director for the Port of Seattle's aviation division and ACI-North
America's chairwoman. "Airports are going to have to de-link themselves from
the airlines."

In some cases, airports took on debt to build projects requested by the
airlines, only to have the airlines come back and complain about the debt
payments, Plavin said.

The airport industry is watching US Airways in Pittsburgh, where the airline
rejected its lease agreements with its hub airport to cut costs. The case is
considered a potential trendsetter for how other airlines will behave in
bankruptcy.

Cash-strapped American Airlines, which may escape bankruptcy court, has
headquarters in Fort Worth and maintains five hubs: Dallas/Fort Worth,
Chicago O'Hare, Miami, St. Louis and San Juan, Puerto Rico.

The days of decades-long residual lease agreements between airports and
airlines may become things of the past, Lindsey said. D/FW has relied on
such agreements since it opened in January 1974.

D/FW, a fortress hub for American and home to an expanding Delta Air Lines
minihub, recently announced that AirTran Airways will soon increase its
flights enough to become D/FW's third-largest carrier, with a significant
gate expansion in Terminal B early next year.

Though there was some trepidation among industry analysts that the move
would anger American, D/FW Chief Executive Jeff Fegan said there have been
no atypical discussions since the announcement.

"It's business," said Fegan, a past chairman of ACI-North America, who is in
Tampa. "The ideal situation is for a large hub to create a carrier-intensive
market. We've always been consistent in our effort to attract other
carriers."

After the 9-11 attacks, D/FW never wavered on building the major projects of
its $2.6 billion expansion. A fifth terminal, the SkyLink people-mover
system, runway extensions and other projects will be complete in early 2005.

Even so, D/FW has made operating budget cuts to keep costs down for tenant
airlines. By Fegan's estimate, D/FW has saved airlines $75 million in the
past three years with slashes including hiring freezes, early retirement
packages and some layoffs.

Airlines spend about $100 million a year on airport fees at D/FW, and they
collect about $7 billion in revenues each year.

About 2,000 airport directors, officials and vendors are in Tampa through
Thursday for the ACI-North America conference.


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

http://www.californiaaviation.org/dc/dcboard.php

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