AAAE Follow-Up

SEATTLE -- American Association of Airport Executives' vice president Spencer Dickerson says the primary issue for airports remains "security, security, security." At AAAE's 77th annual Conference & Exposition held here in May, the discussion proved to be as much about the state of the airline industry and its impact on, well, virtually everything else - airport revenues; planning; trust fund dollars; and on down the chain. The discussion was about the need for airports to continue to find ways to decrease costs to the carriers. Regarding security, the focus was primarily on how to fund what's been mandated by Congress. Then, there's the funding discussion related to FAA operations and the system as a whole.

Interestingly, one issue not prominent at this year's event was the recent decision by the Environmental Protection Agency to require secondary containment for airport refuelers when they are parked. A concern for many airports and their tenants, the decision is being fought via a potential legislative solution by the National Air Transportation Association.

Explains Dickerson, "Things like environmental issues or FAA regulatory issues get put down the priority list, or don't have the light shining on them, because all of the focus of our members is on dealing with security.

"That doesn't mean those issues aren't important."

AAAE's highest security priority, he says, is to get funding for the passenger screening systems at U.S. airports. The target of discussion is Congress, which needs to appreciate the connection between funding in-line systems and ultimately reducing costs for the Transportation Security Administration.

Says Dickerson, "There are significant savings to the TSA personnel costs by going in-line. You need fewer screeners; you have less workman's comp; you have more efficiency in terms of getting bags and passengers processed. You end up saving the government money by going 100 percent in-line.

"Obviously, the money that has been appropriated is woefully inadequate."

Dealing With a Bankrupt Airline Industry

Robert A. Hazel, senior vice president of the Reston, VA-based Eclat Consulting, who spearheaded a session on airline bankruptcies and airport management, says that while the fate of the carriers is forcing airports to react, the financial state of the latter is much brighter than for the carriers. "Even troubled U.S. airports are financially healthy," says Hazel.

According to Hazel, Wall Street projects that Southwest Airlines has a 7 percent chance of defaulting on its debtload within the next five years - very low. The most likely to default, he says, is Delta - Wall Street puts its likelihood at 83.5 percent.

Hazel points out that 23 U.S. airports have lost all commercial air service since 2000; the number would be higher, he says, if not for the Essential Air Service program.

Other recommendations for airports from Hazel:

  • Monitor any assets at the airport which the carriers have agreed to maintain, and expect them to begin to deteriorate.

  • Capital expenditures by airlines are deteriorating "dramatically."

  • It may make sense to purchase assets currently owned by carriers, such as boarding bridges, and arrange a sale/leaseback as a way to help a carrier's finances. [Hazel says this was a tactic used successfully at Lambert St. Louis International, which he cites as the best example of how an airport can weather the bankruptcy storm.]

  • Don't allow carriers to get behind on payments. Otherwise, the airport could find itself as an unsecured creditor in a bankruptcy. United Airlines has been in bankruptcy for more than 30 months, and many lease issues at airports remain unresolved.

Airline Perspectives

Offering the air carriers' perspective during a session featuring airline properties were representatives of Southwest, American, and UPS.

A top concern of Southwest Airlines, says vice president Robert Montgomery, is for airports to bring more consistency to the project delivery system. He wants more consistency in what airports deliver and how they deliver it with major projects. He points to two current landlords, Tampa and another at which Southwest has 20 gates. Montgomery says that with Tampa's new terminal, the airport is providing boarding bridges and other equipment/services, while at the second the airline is providing basically everything.

He also calls on airports to try to be as efficient as possible with new projects, and to keep an eye on unnecessary costs to maintain reasonable airline costs.

Montgomery says he is also concerned about changes in rates and cost per passenger at a location over the life of the agreement. "We get very concerned when there are dramatic changes where we're operating," he explains.

At American Airlines, vice president Laura Einspanier says two top concerns at the carrier are common use systems at terminals and keeping its own costs at a minimum.

Regarding common use systems, Einspanier says American "is not in general in support of shared systems." While she acknowledges that such systems offer an airport more flexibility, they actually restrict an air carrier's flexibility, she says. Unless all airports use the same shared system - hardware, software - it is a problem for an airline which must adapt to each airport. "It increases our cost," she explains.

For airports seeking to attract American service, says Einspanier, it's important to recognize that, internally, carriers are drastically cutting back on their own employees' travel. She says American encourages airports and communities to send their reps to airline headquarters to make their pitch. And, she adds, "we like it when several airports in an area coordinate amongst themselves" and make a packaged presentation to the airline.

One other point from Einspanier: "Co-location with code share partners is not as important as it used to be."

FAA, Funding

Woodie Woodward, associate administrator for airports for FAA, says there is much to be concerned about regarding the Administration's current budget request for FY06, and also for the long-term funding of the system overall.

While Airport Improvement Program funding is authorized for $3.5 billion in FY06, the Administration is budgeting $3.0 billion. Says Woodward, "If we get below the $3.2 billion mark, a lot of bad things happen." Those can include things such as much less state apportionment and noise set-aside funding, she says. "We're trying to manage through that."

According to Woodward, FAA is also in the final stages of reviewing industry comments regarding the agency's proposed changes to the grant assurances.

Meanwhile, Woodward relates that the latest NPIAS (National Plan of Integrated Airport Systems) projects U.S. airport capital infrastructure needs at some $39 billion.

Developments at MSP, Buffalo

In a large hub roundtable discussion, Steve Wareham, director, Minneapolis-St. Paul International Airport, and William Vanacek, director of aviation, Buffalo Niagara International Airport, discussed the challenges and opportunities facing their airports.

At Buffalo, says Vanacek, 2005 and 2006 "are almost all about pavement." The airport is involved in a $44 million project, including extending and rehabbing the pavement. Vanacek adds that Buffalo Niagara is "struggling" with glycol runoff, the cost of which he says "has become astronomical for us." To address the problem, the airport is looking at constructing a ten-acre facility for filtering the runoff, in an attempt to avoid the need for the runoff to go through the "costly" city sewer. This project is estimated to cost some $9.8 million and, according to Vanacek, will be the first of its kind in the U.S. Buffalo Niagara is experiencing a "major increase" in Canadian traffic, and is now served by four low-fare carriers. However, Vanacek says that it's a challenge to retain the service of legacy carriers as low-cost carriers announce new routes. Additionally, says Vanacek, "low-cost carriers have become very demanding."

Minneapolis is at the tail end of its 2010 expansion program, says Wareham, including a fourth runway, expected to open October 2005. The new runway is forecast to improve the airport's capacity by 25 percent.

A major concessions program is also nearly complete at MSP. With 70,000 square feet of retail space, Wareham calls the airport's shopping center "astounding." Regarding areas of improvement at MSP, Wareham says, "I don't think we serve our meeters and greeters very well. There are opportunities there."

Northwest Airlines accounts for some 80 percent of MSP's 36.7 million annual passengers. Wareham says the carrier recently came forward with its growth plan for Minneapolis, which has caused the airport to reevaluate its own growth.

Briefs...

  • ARINC Incorporated introduces a new airline passenger kiosk technology designed to put self-service check-ins within the reach of mid-size airlines and airports. LocalServ™ is intended for airlines that operate without access to a host computer, as well as ground handling companies which provide passenger services for multiple regional, charter, and non-scheduled airlines. The product integrates two separate ARINC technologies, LocalCheck™ local departure control system and SelfServ™ common-use self-service kiosk system; www.arinc.com.

  • FKI Logistex® announces receipt of a $14.5 million contract from American Airlines to integrate an in-line 100 percent hold baggage screening system at the airline's hub in Chicago's O'Hare International Airport. The scope of the baggage screening project covers the integration of 10 CTX 9000 DSi™ explosives detection system (EDS) devices from GE Infrastructure Security, as well as the relocation and installation of three existing eXaminer 3DX® 3000 EDS devices from L-3 Communications; www.fkilogistex.com.

  • Children's play areas, common throughout the nation's shopping centers, are gaining prominence in airports. Englewood, CO-based Playtime Creations offers soft-sculpted indoor play areas or themed outdoor play systems. Services range from conceptual development to final installation and beyond. Features include: custom designed carpets, specialty wall murals, sculpted entrances, sculpted characters, hanging overhead elements, seatback graphics, interactive play panels, and more; www.playtimeco.com.

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