"Airports feel the pinch of flight cutbacks"

Tuesday, July 10, 2012

Airports feel the pinch of flight cutbacks
By JANE L. LEVERE
The New York (NY) Times 

 
The fate of Lambert-St. Louis International Airport may be a portent for
other airports serving smaller cities around the United States.
 
Once the main hub of Trans World Airlines, the airport offered as many as
475 departures a day. But now there are just 256 daily departures, leaving
half the concourses at the older of its two terminals vacant and the airport
scrambling to find new, revenue-generating uses for the space.
 
Already, airports in Pittsburgh (a former hub for US Airways), Cincinnati (a
much-downsized Delta Air Lines hub) and Oakland, Calif., have lost a
significant amount of their business as airlines concentrated more of their
flights at bigger-city airports.
 
As airlines continue to consolidate and cut back on their use of smaller,
regional jets, more airports will be in the same difficult position --
looking for new uses for unoccupied terminals, hangars and other specialized
buildings.
 
"This is an issue many airports are wrestling with," said Lois Kramer, an
airport consultant based in Boulder, Colo., and principal author of a report
on reuse of airport buildings commissioned last year by the Transportation
Research Board, a division of the National Research Council. "Nobody wants
to talk about it, but vacant space at airports is more widespread than one
would think."
 
Unlike airlines, many of whose assets are movable, "the airport industry is
primarily a business of fixed assets: terminals, parking garages, roadways
and airfields," Kramer said. "When an airline vacates a terminal, the
airport still has to cover the cost of operating the building and pay on any
outstanding debt service."
 
Airports generate revenue in two ways -- through fees paid by airlines and
general aviation operators and through income from parking, car rentals,
concessions, advertising space sales and rentals of maintenance and other
buildings.
 
If airlines merge, file for bankruptcy protection or eliminate flights at an
airport, both types of revenue may be reduced, said Deborah McElroy,
executive vice president for policy and external affairs for Airports
Council International-North America. To deal with a drop in revenue, she
said, airports have taken a number of steps, including "personnel
reductions, deferral of nonessential projects and renegotiation of existing
debt obligations." They also "may be forced to raise prices for services at
the airport, such as parking," she said.
 
Although demolition often is the lowest-cost option, that, too, can be
expensive and out of the reach of financially stressed airports. A good
example is Oakland International Airport, which, at its peak in 2007, served
14.8 million passengers but served 9.3 million passengers last year.
 
In 2003, when United Airlines filed for bankruptcy, it walked away from a
25-year lease, signed in 1988, for the Oakland Maintenance Center. It
consolidated its maintenance operations nearby at San Francisco
International Airport.
 
According to Kramer's report, the Port of Oakland has had trouble finding a
replacement tenant that would generate comparable rental income. Nor does
the port have the $4 million needed to demolish the building. The port uses
the building for offices, and rents its exterior as billboard space.
 
While port officials declined to comment on their search for a new tenant
for the maintenance building, they did say they have been able to increase
general aviation operations on the north side of the airport. Michael
Visconti, property manager on the north side of the airport for the Port of
Oakland, said companies offering general aviation services paid the port
rent and fees totaling $4.9 million in the past fiscal year.
 
Officials at Cincinnati/Northern Kentucky International Airport face many
similar problems. Delta at one time operated a major hub there, flying 600
of the airport's 650 daily departures in 2005.
 
Today, Delta is still the biggest carrier at the airport, but offers just
125 of the airport's 170 daily departures. Delta occupies one concourse in
the largest of the airport's three terminals, and in May, the other carriers
serving the airport -- United, American Airlines, US Airways and Air Canada
-- all moved to the same terminal as Delta, leaving the other two terminals
empty.
 
The airport is looking at its options, said Meghan Glynn, the airport's vice
president for external affairs, including demolishing one or both empty
terminals and moving the rental car operation closer to the remaining
terminal.
 
Rhonda Hamm-Niebruegge, the director of the St. Louis airport, is
aggressively seeking new tenants. The B concourse in the airport's old
terminal could be turned into "great office space, because it's small,
compact and close-in, she said. 

The old terminal's long, one-sided D concourse is a different matter. The
airport could turn part of it over to Southwest Airlines, which now flies
almost half of the airport's service, should the carrier wish to further
expand its operation. The concourse could also be torn down to open up
revenue-generating parking space, now in short supply.
 
"As an airport," Hamm-Niebruegge said, "you need to go out and look at
everything, things that a decade ago you wouldn't have thought about."