Non-aeronautical Revenue Play by Play

Pittsburgh International Airport new development strategies get it back in the revenue game


In the early 2000s, Pittsburgh International Airport (PIT) was forced to revisit its playbook. At a time when the bustling hub sat at the top of its game, the airport found itself blind-sided by its top carrier, US Airways, when it announced plans to reduce flights coming through Pittsburgh. But even with such a loss, PIT couldn’t afford to fumble. An airport can’t trim runway maintenance or let its infrastructure crumble away. The game must go on.

PIT officials rallied to develop a new game plan, and hit upon a winning strategy that included developing land around the airport to help drive new revenue in order to make up for the revenue it had lost.

Today 16 buildings, offering a total of 2.4 million square feet of space, stand on what was once rolling topography and wetlands on the medium-sized hub’s northwest side. And the results have been tremendous, says Randy Forister, PIT senior director of development. “We have received approximately 40 million in economic development grants from the state in the last decade and we’ve created nearly 6,000 jobs.”

The feather in this Pennsylvania airport’s development cap might very well be its $500 million drilling lease that gives CONSOL Energy the right to drill for natural gas and oil on airport lands. Under the deal, CONSOL paid a signing bonus of $50 million and will pay 18 percent royalties expected to total approximately $450 million over the next 20 years. The airport, which serves approximately 8 million passengers annually, plans to use the funds gained by drilling to tackle needed capital improvement projects and recently lowered fees paid by airlines as a means of attracting more flights and new carriers.

Todd Lehmacher, spokesman for US Airways, Pittsburgh’s largest carrier, says the fee decrease won’t result in an immediate boost in flights but stresses the importance of competitive fees in an industry with such high fixed costs. “We applaud the Allegheny County Airport Authority for lowering them,” he says. “It’s something we’re very mindful of.”

PIT has done some very nice development on its lands, according to John Kasarda, an airport strategist and leading developer of the aerotropolis concept. “When you consider the shock that airport took losing its hub, because its terminals were designed for a major hub and it still had to pay for them, they have done quite well.”

He adds PIT is one example of a growing trend to develop around the airport; a strategy that can tremendously impact an airport’s financial picture. ACI-NA reports in “Facts About Airports & The 2013 ACI-NA Membership and Media Directory” that non-aeronautical revenue puts an estimated $7.5 billion to the bottom line annually at the nation’s airports; a number that can and should grow as more airports follow the lead of airports such as PIT, Dallas Fort Worth International Airport, and Hartsfield Jackson International Airport. “For many airports, non-aeronautical revenue, which is basically commercial involving everything from parking to retail and concessions to real estate development on airport property is generating larger and larger percentages of total revenues,” Kasarda says.

On the flip side, Kasarda cautions that while some U.S. airports have done quite well with this concept, just as many haven’t had the idea of an airport city cross their minds, let alone their unused lands. “None of the airport cities in the United States made the Top 25 [in the latest Skytrax survey],” Kasarda says. “However, amazing strides being made and U.S. airports are beginning to catch up. Over the last decade, U.S. airports have become increasingly aware ... that their land is very valuable.”

 

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