Making the Most of a Downturn

On tap at Orlando: efficiency; new ideas; and weathering the financial storm

ORLANDO — The annual Airport Revenue News (ARN) Conference held in mid-February saw an expected drop in attendance from recent years, yet the conversation proved robust as airports discussed the challenges of operating during a recession. Also, an economist from the Brookings Institute shared his thoughts on increasing operational efficiency, and ‘urban theorist’ Richard Florida shared retail strategies and how to embrace his concept of the creative class.

Chairman of Armbrust Aviation Group, John Armbrust, compares the current economic struggles with the recession of 30 years ago, a time when the housing market was overheated and unemployment rates rose above 11 percent. “In a similar time like this, what did business do?” asks Armbrust. “What did individuals do?”

Armbrust cites early 80’s entrepreneurs like Bill Gates, Louis Cane, and Steve Jobs as examples of leaders who provided the innovation needed to climb out of a volatile economic environment. During the current period of indecision and insecurity about the future of business, Armbrust calls for a renewed drive for leadership in the aviation industry; a drive illustrated by current leaders of airports across the nation.

New York Area Airports
With the largest origin and destination point of sale market in the world, New York has been lucky, says director of aviation for the New York and New Jersey Port Authority Bill DeCota. “We were adding what I like to characterize as a new Albany Airport of traffic every nine months, because we were adding about four million passengers every year since 9/11.”

With some 110 million passengers in 2007, last year’s enplanements fell back to nearly 107 million, and the authority is projecting 104 million for 2009. New York was hit hard by the financial services sector making this year a “tough challenge,” explains DeCota, yet the New York market has proven to be resilient. International traffic remained strong, sustaining the growth of airport revenue, some $2 billion in ‘08, yet there have been steady declines in activity, such as parking.

There is also an enormous number of projects the airports need to undertake, says DeCota. “Our capital capacity has been challenged: revenues from all of our facilities are down, the money we were earning on our reserves are down, and the cost of money, if we can get access to the market, has gone up.”

DeCota is currently at work trying to get a new terminal for Delta at JFK underway while also replacing the 44-year old LaGuardia terminal building. The authority has plans to replace and expand Newark’s terminal A, built in 1973, and to completely redevelop terminal B. Along with a $372 million bay runway project at JFK, the authority is also in the process of taking over a hotel at the airport and finishing a perimeter intrusion detection system.

Aviation general manager for Atlanta, Ben DeCosta, says that while it has been a tough year for airports across the nation, Hartsfield-Jackson Atlanta International Airport saw a record 90 million passengers in 2008. International traffic grew 3 percent, and growth is expected to continue with the Delta/Northwest merger. Domestic traffic was up just under 1 percent, and officials have forecast this year’s gross revenue to be $402 million, $21 million less than what was forecast prior to the first quarter.

Hartsfield cut its operating budget by $10 million last year when fuel prices shot up and carriers raised fares to adjust. Despite the budget cuts, furloughs and layoffs have been avoided at the airport, says DeCosta. “Our team is together, and that’s the important thing for our future.”

The airport has an active capital program and has recently completed a $650 million rental car facility. Officials are also designing a new $1.3 billion international terminal. “Unfortunately if we don’t get into the credit markets in the next couple of months, all construction is going to stop,” says DeCosta. “More than 300 workers would be sent home and 3000 jobs that the terminal construction would have provided will be lost.

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