DIA bursting at the seams

The airport has cemented plans for a long-awaited terminal hotel and galvanized retail development on Pena Boulevard.

"I think the leadership in Denver and at the airport have certainly helped position DIA to be able to accommodate 50 million passengers ahead of schedule," said Mary Rose Loney, an industry veteran who heads a public-private organization that works to promote airport issues. "Nobody's been turned away, and that's a good thing."

But the work is just beginning.

"We've taken care of the easy, incremental stuff such as adding a parking garage or a train car," said Busch, DIA's planning director. "We're running out of easy solutions."

So the airport is gearing up for its largest expansion and upgrade phase since opening.

DIA is issuing more than $1 billion in bonds to pay for capital expansion. Projects cover everything from bolstering snow-management plans and improving restrooms to adding more concession and seating areas, enhancing landscaping and constructing a new baggage system.

It's finalizing plans to accommodate a new Regional Transportation District rail station - a project that will cost $57 million - and is preparing to add security screening lanes and more checkpoints in the next few years.

"These are all of our immediate needs, the things we've identified as important, looking just a couple years out," said Sally Covington, DIA's deputy manager of aviation, public relations and marketing.

The airport also is taking a comprehensive look at its long-range plan for the next 20 or 30 years, including determining when it might need a fourth concourse and more runways.

Tricky task

DIA now faces the challenge of keeping up with demand without outpacing - or underestimating - it.

The fallout if DIA miscalculates?

If it grows too quickly and demand doesn't pan out, the airport might have to pass more costs onto airlines. That could lead to higher fares and less service.

If it doesn't grow quickly enough, DIA could become a crowded, congested, inefficient airport, which could deter businesses from setting up shop or expanding here, thus making the travel experience miserable.

"If you don't grow in conjunction with demand, then you have those situations at other airports where the security lines are always horrendous and the concessions aren't up to par and the whole thing starts to break down," said Armbrust of Airport Revenue News.

A lingering question is how DIA will pay down all its new debt.

Some of it will come through higher fees to airlines, which DIA has been aggressively trying to minimize.

The airport estimates that costs per enplaned passenger could rise from $11.16 this year to $15.01 in 2013, according to its bond prospectus. That increase could deter airlines from expanding or coming to DIA in the first place.

For an airline the size of Frontier, a $4 increase per passenger would translate into an additional $40 million this year. The Denver-based carrier called DIA's projected increase "problematic" because the airport already has higher-than-average fees.

"Anytime it becomes more expensive to handle a customer at DIA, it can (stifle) growth," said Chris Collins, Frontier's senior vice president of operations. "If our rates go up, that's bad for all airlines."

Still, other major airports nationwide are facing more severe capacity constraints, and many have embarked on massive expansion plans. Most of those airports don't have any space left, so their construction costs are much higher.

"We're seeing a lot of larger airports moving toward the $10 to $15 range" in cost per enplanement, said Pete Stettler of Fitch Ratings, which has given DIA's bonds strong ratings. "They're having to expand as well. So DIA in the ($15) range is not terribly alarming."

While passengers might think DIA has done too little, too late, Stettler says it's the financially prudent way to grow.

"You want to make sure the momentum is there before you undertake expensive capital projects," Stettler said. "You want to make sure that what you're doing is prudent and can be supported by demand. These things are large, complex and expensive."