MOVING FORWARD

DFW AIRPORT — Like other airports around the country, Dallas/Fort Worth International is waiting to move forward with an in-line baggage screening system for its terminals. Airport officials say all the groundwork has been laid. While the wait for the Transportation Security Administration to allocate funds continues, DFW is moving along with a multibillion dollar capital development program, which began pre-9/11.

"We’re at the altar," airport CEO Jeff Fegan says. "Any day we’re expecting to get an LOI (letter of intent) MOU (memorandum of understanding) from the TSA to basically agree to pay us back for 75 percent of the costs of the facilities and improvements. We’ve done everything short of actually starting construction. The real project and money will be spent when we get the letter of intent."

Further, Fegan says, "I understand why it’s only 75 percent and not 100 percent—there’s a limited amount of resources out there. I think most airports and all airlines are saying they think TSA should pay 100 percent… It’s a TSA function, and it should be a TSA cost, but it’s probably the best that we can do at this time. The bigger problem is it’s 2003, and we were ready two years ago. Now we’re not as far along as we could have been/should have been. The federal government hasn’t found a way to get us the necessary resources. I’ve been waiting for this LOI ‘any day now’ for the last three months"

DFW was able to begin construction on an in-line system in Terminal C, with funding provided by a $26 million FAA grant. It is estimated that the cost of in-line systems in terminals A, B, and E will total some $140 million and could be completed by spring 2004.

DFW’S CDP

DFW is also in the midst of a $2.6 billion, five-year capital development program, which includes airfield projects, an automated people mover (APM) system, the construction of Terminal D, support and infrastructure projects, and roadway infrastructure projects.

Terminal D, set to open during first quarter 2005, will be the new home to all international flights, according to officials. The two million- square foot facility will feature 28 gates and is poised to handle 12.5 million enplanements annually. The project also encompasses a new Grand Hyatt Hotel and an 8,000-car parking ramp, which includes an integration of technologies from Federal APD as part of a facilities management control application to automate functions and increase vehicle throughput.

The APM is a closed-loop system that spans nearly five miles in circumference, and goes around terminals A, B, C, D, E, and the future Terminal F. The fleet of 64 Bombardier cars will travel in pairs and can hold some 60 persons. On opening day, the APM is expected to be capable of handling 5,000 passengers per hour in each direction, with the average train ride lasting eight minutes. According to Perfecto Solis, APM program manager, the first car is already in the dynamic testing phase and the entire system is on track for operation first quarter 2005. Each terminal will have two APM stations, where passengers can load and unload from either side of the car.

Solis explains before any work on the APM system could be done, some $40 million in gate remodeling was completed to make way for the rail.

APPROVAL OF PARTNERS

DFW has an agreement with its tenants under which any major project where new debt is issued requires the approval of more than half of those tenants who are signatory to the airport’s use agreement, which most of the airline tenants are, according to Clay Paslay, executive VP of airport development.

Fegan adds, "Basically, if you don’t have American Airlines, you don’t have a vote. And, if you have American Airlines and don’t have most of the other carriers, you don’t have a vote."

The airport was able to finance the capital development project primarily through PFCs. Currently, the airport collects $4.50 per ticket, with $3 going toward the terminal and people mover projects, and $1.50 toward other projects.

STUMBLING BLOCKS

Following 9/11, many airports scaled down their development projects or halted them completely. DFW was fortunate enough to continue as planned. "We were heavy into the project and we had to make a choice whether to move forward or just stop everything and have a skeleton of a building for many years," Fegan says. "We looked at the costs, and the pros and cons of stopping or continuing. You certainly can’t shut down a half-constructed project and expect to come back two or three years later when the economy is better and be able to do anything with it. So we made the long-term strategic decision to move forward."

Richard Lee, VP of HKS, Inc., explains that some modifications had to be made to the structure following 9/11. “We upgraded the structural capacity to resist blasts, and there were baggage layout changes to accommodate in-line,” he says.

In spite of the current economic conditions, especially for the airlines, Fegan is optimistic about the future. DFW has worked closely with the airlines, particularly since 9/11, to provide aid to the struggling airlines. "Over the last three years, we’ve probably provided $75 million to the airlines in rent relief," Fegan says. "We did that by cutting our budgets and providing the capital to offset O+M costs for the airlines. We found ways to pay for things, other than passing additional costs onto the airlines."

Originally slated to occupy the north portion of Terminal D, Paslay says American Airlines is "reevaluating facility needs within Terminal D, but they still fully plan to move into [the new facility].”

Industry-Wide Frustration

Airports like Dallas/Fort Worth International aren’t the only ones eagerly awaiting LOIs from the government. Among the companies that have been preparing since 9/11 to help airports meet the goal of in-line baggage screening is Siemens Dematic.

"There’s a lot of frustration because we manned up to do this work and now we’re just waiting," says Peter Metros, member of the board, Siemens Dematic. "We stand ready with the resources."

Siemens Dematic is handling the system design, manufacture, and installation of the in-line baggage screening system in DFW’s new Terminal D, which includes 40,000 linear feet, or close to seven miles, of conveyor. The system is expected to handle 80 bags per minute and is on schedule for the opening of the new terminal.

Steve Axelrod, executive VP for Siemens Dematic Material Handling Automation in the Americas, says once the LOIs are issued, two things could happen: one, in-line systems will be contracted through the TSA/Boeing contract; or two, the contracts will go into the commercial arena.

Axelrod estimates the company could see in-line business totaling some $500 million each year for the next five years. "And that’s just our share," he adds. "There are a number of competitors out there... Few airports have been sole-sourced in the past.”

DHS Signs LOIs

On July 7, the Department of Homeland Security signed three Letters of Intent to three airports to help with the costs associated with installing inline explosive detection systems.

The airports are Dallas/Fort Worth International, Boston Logan International, and Seattle-Tacoma International. The Transportation Security Administration, a division of DHS, expects to agree to similar financial arrangements with several more airports in the next few weeks.

DFW will receive $104 million, while BOS and SEA will receive $87 million and $159 million, respectively. The LOIs are subject to the availability of funds.

Under the agreements, TSA will pay 75 percent of eligible costs over a three- to four-year period while airports agree to cover the remaining portion of the costs. Permitted capital improvement costs include preliminary site preparations, structural reinforcement, electrical work, heating, air conditioning, and other environmental improvements, as well as conveyor belts, tables, and physical enhancements to operate an in line system.

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