"Indianapolis Airport proposes cost cuts for airlines"

Saturday, July 10, 2004

Airport proposes cost cuts for airlines
Passenger flights would see 10% reduction in fees, but cargo carriers
expected to pay more.
By Chris O'Malley
The Indianapolis (IN) Star
 

Passenger airlines would pay less to use the airport next year, under
proposed rates and charges to be presented July 23 to the Indianapolis
Airport Authority board.

The board will propose a 10 percent reduction in airline costs per
boarding passenger -- to $6.89 from $7.68. That would have saved
financially struggling ATA Airlines about $307,000 in the first five
months of this year, based on its traffic volume for the period.

The airport is proposing the reduction because it soon will retire bond
debt floated in 1998 for terminal improvements. It aims to pass its
savings on debt service along to passenger airlines.

ATA, the busiest airline company at the airport, lost more than $64.7
million in the first quarter and anticipates a second-quarter loss,
blaming higher jet fuel costs and declining military charter revenue.

About 388,600 passengers boarded ATA and its Chicago Express unit at
Indianapolis International Airport through May 31. Airline officials
were not available for comment.

"The passenger carriers should be quite happy," said Dennis Rosebrough,
spokesman for airport management firm BAA Indianapolis. "We want to be
conscious of their costs."

But cargo carriers, including FedEx, would pay more in 2005 under the
proposed rate ordinance, which is to be considered by the municipal
authority late this month and is subject to two subsequent public
hearings.

Cargo carriers pay only landing fees, which would rise 33 percent under
the proposal. Passenger carriers also pay landing fees, but the increase
in that fee was offset by reductions in two others: a proposed 73
percent cut in apron rental and 4 percent cut in terminal rent.

With lower terminal rents because of the retired bond debt, the
authority's debt service costs would be reduced by about $15 million.

FedEx operates its second-largest U.S. air cargo hub in Indianapolis.
Company officials could not be reached for comment.

The increase in landing fees could be mitigated, however. A consulting
firm hired by BAA reported that cargo landed weights in 2005 are
projected to be 10.4 percent lower than in 2004.

The authority held the line on landing fees in 2003 and 2004 by
crediting airlines $35 million over the two years. But now, with that
pot of money no longer in the bank, "the ratings agencies are looking to
us to generate a higher level of cash flows," said Marsha Stone, finance
director for BAA Indianapolis.

Stone said BAA found 10 comparable airports charged a landing fee in
2002 equivalent to what Indianapolis airport managers are recommending
for 2005.

BAA is projecting total airline revenue next year will grow 4 percent
over 2004. At the same time, nonairline revenue is forecast to grow 15
percent, thanks partly to 9 percent increase in parking revenue and a 5
percent jump in retail revenue.

But airport managers say other income, such as that paid to the airport
by rental car companies, could fall. Rental cars tend to be used more by
business passengers, whose numbers are falling relative to leisure
passengers. The Indianapolis Convention & Visitors Association
anticipates a "slight dip" in convention business next year, the airport
authority board was told Friday.


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