"Effect of airport fee reductions at Hancock uncertain"

Sunday, July 3, 2005

Effect of airport fee reductions at Hancock uncertain  
By Kevin Tampone
The Central New York Business Journal  


SYRACUSE - Last week's reduction of landing fees and terminal-rental rates
at Syracuse Hancock International Airport has left the facility more
competitive with its Upstate counterparts.

The ultimate effect of the fee reductions on the availability of air service
to and from Syracuse, however, is less clear.

The city announced June 22 that landing fees at the airport would drop from
$2.61 per 1,000 pounds of landed airplane weight to $2.46 per 1,000 pounds.
The rental fees airlines pay for space in the terminal are also being cut
from $69.99 per square foot to $64.09 per square foot.

The changes took effect July 1.

"It shows the airport is doing its best to cut costs for the airlines," says
Anthony Mancuso, aviation commissioner. "I think it's a very large piece of
airlines deciding on expansion of service."

Greater Rochester International Airport is now the only major, upstate
airport with landing fees cheaper than Hancock. Airlines landing there pay
$1.82 per 1,000 pounds, says David Haas, senior management analyst for the
facility.

At Albany International Airport airlines pay $2.54 per 1,000 pounds and at
Buffalo Niagara International Airport they pay $2.87 per 1,000 pounds.

Terminal-rental rates are $55.43 per square foot in Rochester, $82.72 per
square foot in Albany, and $39.13 per square foot in Buffalo.

The fee reductions at Hancock are possible because of the airport's recent
success, Mancuso says.

Since passenger traffic has been on the rise, planes' landing weights have
been higher, which means more fee revenue, Mancuso says. In 2004, traffic
rose more than 19 percent to its highest levels since 1992.

That translates into more than $1.2 million in extra landing-fee revenue for
the 2004-2005 fiscal year, according to the city's 2005-2006 proposed
budget.

Increased revenues from concession sales at the airport also played into the
fee reductions, Mancuso adds. Those revenues were up nearly $700,000 during
the 2004-2005 fiscal year, according to the budget.

The airport's total budget is about $14 million.

"[The reductions] make the airport more business friendly," Mancuso says.
"It shows a commitment to cutting costs."

Representatives of several airlines, however, say the relationship between
reduced costs and increased service is not necessarily direct.

The cost of doing business at an airport is just one factor in decisions on
service expansion, says Amy Kudwa, a spokeswoman for US Airways, Inc., which
provides more flights and destinations out of Hancock than any other
airline.

"Customer demand is probably the most key element," Kudwa says. "The cost of
flying into an airport does play into those decisions, but where people want
to fly is probably most important."

Kudwa had no comment possible service expansion in Syracuse. The company has
been in bankruptcy protection since 2002 and reported a loss of $39.7
million for the month of May.

Richard DeLisi, director of corporate communications for low-cost-carrier
Independence Air, says the fee reductions probably will not lead to an
increase in Syracuse service.

"Our schedule in Syracuse is pretty well set," he says.

He adds, however, that Independence has never run into a situation at any
airport, including Hancock, where the cost of doing business is prohibitive.

"Every airport in America is constantly hungry for low-fare service," he
says. "We've traditionally received a very warm welcome at the airports
we've entered."

Independence announced in May it expects a first-quarter net loss of $105
million.

Even with the landing fee and rental rate reductions, Syracuse remains more
expensive than any other airport in the Northeast for JetBlue Airways, says
Bryan Baldwin, a spokesman for the low-cost carrier. The comparison includes
airports in upstate New York and Vermont, Baldwin says.

He says the latest fee reduction is a step in the right direction and that
the airline wants to grow in Syracuse, but needs further cost reductions to
do so.

"JetBlue would like to be able to grow in Syracuse, but we want to remain a
low-fare carrier," he says. "It becomes difficult to stay a low-fare carrier
if we cannot remain a low-cost carrier."

In addition to costs, JetBlue also examines fares, demand, traffic patterns,
and aircraft availability when making service expansion decisions, Baldwin
says.

JetBlue reported in April it had revenues of $374.2 million and net income
of $7 million for the first quarter of 2005.

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