Lambert Field May Need Revenue Infusion

Lambert May Need Revenue Infusion 
St. Louis Post-Dispatch, MO

02/16/2004 


To breathe financial life back into Lambert Field, St.
Louis may have to price its airport more like a
Wal-Mart than a Neiman Marcus - at least to
cost-conscious airline executives who decide where
their planes fly. 

Keeping the airport competitive by slashing costs and
tapping new funding sources is one way to keep Lambert
viable during the current downturn in the aviation
industry, according to a report by local business
leaders released Monday. 

"We have to improve our airport," said St. Louis Mayor
Francis Slay. "We have to make it more attractive to
our customers. Like any other business, we have to
offer a good product at a competitive price." 

Slay has asked former U.S. Sens. Thomas F. Eagleton,
John C. Danforth and Alan J. Dixon to "undertake the
diplomatic mission" of seeking a regional approach to
airport governance and finance. That won't necessarily
mean new taxes to keep the airport competitive, but
Slay wouldn't rule that out. 

The 17-member task force was headed by David C.
Farrell, former chief of May Department Stores Co. One
task force member credited Farrell with bringing a
retailer's touch to rescuing the airport. 

The report found St. Louis will have to find $35
million to $50 million a year to keep Lambert's costs
low enough to compete for passenger flights. In
particular, the cost per passenger is expected to
increase significantly after its new runway opens in
late 2006 or early 2007. 

Seeking to make the airport more attractive to
airlines and passengers, Slay has already tapped
retired Sara Lee Bakery chief Barry H. Beracha to
represent him at the airport. Beracha will work for at
least one year without pay and will team with Airport
Director Leonard L. Griggs Jr. to: 

Bring in the $1.1 billion runway expansion on time and
on budget. 

Help streamline operations at an airport that lost
half its American Airline flights in November. 

Persuade airlines to increase flights at Lambert. 

Improve marketing and customer service at the airport.


Slay insists he still has "complete confidence" in
Griggs, someone who has "led this airport through
thick and thin for many, many years." The airport has
cut its operating budget by $12 million a year,
deferred some projects and attracted 40 new flights to
partially replace those cut by American. 

But he added it just "makes good business sense" to
invite in someone with Beracha's credentials. 

Researched and written with the help of consultants
PricewaterhouseCoopers LLC and Campbell-Hill Aviation
Group Inc., the task force report supports the city
decision to finish the runway project known as W-1W. 

But it also raised concerns that delays had put the
project six months behind schedule and jeopardize the
city's ability to begin making debt service payments.
It also said "substantial contingency funds have been
exhausted." 

Griggs defended the oversight of the project. He said
the city has obtained $85 million in federal grants
since the report was written, a move that allowed work
to continue. 

"I will stake my life that W-1W is on target. It is on
budget," Griggs said. 

The report found that the airport has lost half of its
passenger flights since the latest recession and the
terrorist attacks on Sept. 11, 2001, significantly
driving up landing fees and the costs per passenger. 

The task force urged the city to keep the airlines'
cost per passenger at $6 to $8. That passenger cost is
expected to rise from last year's $5.83 per passenger
to $13.54 when the new runway opens if no action is
taken. 

To prevent the higher costs, which include rent and
other fees, the city must reduce costs or increase
revenues by as much as $50 million a year by 2007. 

"It is very refreshing because a lot of communities
act as though whatever they charge, (the airlines)
have to come," said aviation consultant Michael Boyd
of Evergreen, Colo. 

Boyd said a $6-to-$8 per passenger cost is a
"reasonable" goal and the airport's eye toward the
bottom line should play particularly well with
Southwest Airlines, which has a major presence at
Lambert Field and is very sensitive to airport costs. 

The cost of doing nothing is significant, local
leaders warned. 

Danforth warned that the businesses will not relocate
to the St. Louis region if it becomes an "air
transportation backwater." 

"There is no question that the city of St. Louis
cannot on its own produce the additional funds to save
Lambert," Danforth said. "If we are to save Lambert -
and more generally air transportation - that will be a
regional responsibility." 

When asked if St. Louis-area taxpayers will be asked
to pay higher taxes to save the airport, Slay said he
is "not wedded to any approach here." The former
senators will look at several options, he said. 

"I have just asked them to explore what's possible -
financially, politically and legally," he said. "So at
this point, we know there is going to have to be some
kind of revenue source somewhere. In what form and how
we do it, we haven't decided." 

St. Louis County Council Chairman Skip Mange, R-Town
and Country, said the controversial issue of airport
governance is likely to be revisited. 

Lambert is owned and operated by the city of St.
Louis, and the city has a controlling majority on the
governing board. But the airport lies in St. Louis
County, and some surrounding communities have sparred
with the airport over expansion and noise. 

"We have always felt that we need to be involved in
the governance of the airport," Mange said. "And we
recognized that with that comes other
responsibilities." 

Rowan Raftery of Bridgeton, a longtime opponent of the
airport's latest expansion, said the announcement
Monday may run counter to the city's repeated
assurances that a new runway could be built without a
bailout from local taxpayers. It also contradicts
airport claims that the "money is in the bank" to
complete the runway, he said. 

"It seems like the money isn't in the bank," Raftery
said. 


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