MIA's South Terminal set to open amid high expectations

Aug. 27--JOHN COSPER,

deputy aviation director

Two years late and hundreds of thousands of dollars over its original budget, Miami International Airport's South Terminal will begin opening this week, offering passengers much more spacious and modern surroundings that rival other major facilities nationwide.

Walls of expansive glass windows frame the five-story terminal, which will feature a huge rotunda for dining, rows of shops -- that will be ready later -- and colorful artistic touches.

Totaling 1.7 million square feet, with 15 new gates in J and 13 gates in H, three checkpoints and a massive new federal inspection station for international travelers, the $1.1 billion terminal is equivalent to a new mid-sized airport, Miami-Dade Aviation Director Jose Abreu said.

"Opening the South Terminal really is a major event in this airport's history," Abreu said, citing it as MIA's first new terminal since the airport was built in the 1950s.

Still, the South Terminal's emergence has been beset by years of delays stemming from a shortage of construction workers, cost overruns largely tied to changes in plans, and time-consuming squabbles between the airport, contractors and consultants.

The terminal's opening -- which will be phased in, with Delta Air Lines arriving Wednesday, Air France Friday, Lan Airlines next Tuesday and others following through late October -- is critical to MIA's complicated, layered expansion plans. It is essential to allow carriers to move out of Concourse A, so that it can be closed Nov. 10 to ramp up construction of the $2.66 billion North Terminal, Miami-Dade Aviation Deputy Director Max Fajardo said.

Yet, the South Terminal's opening comes as the airport is still struggling to regain passenger volume lost since the Sept. 11, 2001 terrorist attacks. The terminal is expected to be used by about a quarter of the airport's passengers, or about 8.1 million of MIA's 32.5 million travelers logged in 2006. MIA's traffic peaked at more than 34 million in 1997 and has only been on the rise since 2004.

Meanwhile, exploding construction costs have contributed to boosting the airport's massive, long-delayed capital improvement program to $6.2 billion, and will raise the airport's projected cost per passenger so high that MIA risks losing future traffic.

Per-passenger fees MIA charges to airlines -- which Abreu had hoped would be hovering in the low $30s by 2015 -- could rise to $37 to $38 in 2015, from $17.01 currently. MIA's terminal costs are paid by the airlines based on their levels of aircraft seats as well as the space they lease.

The higher fees could drive airlines to reduce flights or fly elsewhere. And that prospect could lead agencies to lower their ratings on the airport's bonds used to fund the capital improvement program, thereby making borrowing more expensive, adding to the costs.

BOND DOWNGRADE

In fact, Moody's Investors Service downgraded the airport's bonds from A1 to A2 -- its third-highest U.S. airport rating -- in November of last year, because of such concerns. The rating agency said: "Airline costs will rise significantly enough to potentially erode future traffic and revenue."

Moreover, high costs at MIA are a major reason the airport has had trouble attracting low-cost carriers, which have made Fort Lauderdale-Hollywood International Airport their base. Per passenger costs there are currently $4.36.

MIA's dramatic South Terminal -- consisting of an improved Concourse H and a new Concourse J -- was first conceived 10 years ago. It was created to appease a half-dozen major carriers, who sued the county, objecting to having to pay a share of construction costs for American Airlines' North Terminal, which is currently slated to open in 2011.

The South Terminal was planned to house airline members of the Star Alliance -- United Airlines and its partners -- as well as members of SkyTeam, including Delta. But since then, United has eliminated the Latin American flights from MIA that had made it the airport's second-largest carrier after American. It now operates just a handful of daily flights to Chicago, Denver and Washington.

And instead of the 26 airlines the terminal expected to house when it was first designed, just 19 now plan to move in.

Meanwhile, costs have soared.

The terminal's budget was $799 million when contractors Parsons-Odebrecht Joint Venture broke ground in 2002, with a completion date set at 2005. But eight construction change orders and assorted other problems complicated matters, adding $300 million to the price, and leading to two years of delays.

COSTLY ADD-ONS

Among the biggest add-ons: about $100 million in post 9/11 security enhancements, including a conveyor system with more than

3 miles of conveyors and an up-to-date in-line baggage screening system -- designed to handle 4,000 bags an hour -- using explosive detection machinery hidden behind the scenes. Also, $25 million to

$30 million related to installing a fiber-optic communication system throughout the building, known as the Premise Distribution System; and $20 million to $25 million related to changes requested by airlines, Fajardo said.

Adding to the high costs were soaring material prices, including cement and structural steel.

Most troublesome of all has been the chronic shortage of construction workers to complete the job, said Fajardo, who has been the point person on the South Terminal for the past eight months.

About 80 subcontractors have worked on the project, yet there have not been more than 700 workers on site -- far less than required to complete the job on time, Fajardo said.

'Our contention is: 'Your schedule does not reflect the number of people you have on the site,' " Fajardo said.

The most recent delay came in January of this year, when the opening was pushed back to August from March -- after having been delayed from the fall of 2006.

"The delays on South Terminal are a result of failure to pursue the work and a real effort to get it completed," Deputy Aviation Director John Cosper said in January. "I don't see a desire to complete the job over there."

POJV, which is also the contractor on the North Terminal, won't respond definitively to the causes of the delays, acknowledging the sensitivity of the subject.

Gilberto Neves, chief executive of Odebrecht USA, said that at times, 1,000 workers were on the job. But having more workers would not have guaranteed that the terminal would have been opened earlier, he said, because of so many changes requested by the airport.

"There was a need for more manpower, yes, but I don't know if loading the job with more men [would have led to its opening earlier]," Neves said.

An analysis of the project's scheduling -- which required 30,000 construction activities -- is now underway to determine if the changes had more of an impact on delays than the labor shortage, he said.

That could translate to a request to the county for even more money.

While construction delays have surely added to the project's budget, as costs keep escalating, Fajardo said he could not put a price on them. To date, POJV has been paid for 96 percent of the airport's completion, but more claims for additional funds are expected.

"Everyone thinks we have endless pockets," Fajardo said. "It doesn't work out that way."

Besides MIA, several major airports nationwide have also added new terminals during the past few years, including San Francisco, Dallas-Fort Worth and Detroit. And cost overruns are not uncommon, said Dick Marchi, senior advisor of Airports Council International North America.

FALLING BEHIND

"Construction costs have been escalating much faster than the consumer price index for the past 10 years or so, so you can easily get behind the eight ball in cost estimating," he said. "It happens in so many projects."

Still, airlines say they are happy to be moving to the new terminal, which will offer more space and a large, nearby federal inspection station that can process 2,000 international passengers per hour.

"It's going to be a much more pleasant experience for passengers, after waiting, and also arriving at the airport," said Carlos Roman, marketing director for Lan Airlines, which will operate 38 flights a week from the new Concourse J.

Passengers will also see plenty of art. The airport is spending $9.4 million on art projects, including $5 million for a terrazzo floor, glass and stone panels depicting the environment of the Everglades.

In all, the terminal will feature 50,000 square feet of concession space, including an 8,900-square-foot food pavilion and a 1,000-square-foot-long concession hall, with a total of 49 new dining, retail and duty-free locations.

There, passengers eventually will be able to buy a portable DVD player, grab a guayabera, or snag a travel iron or some jewelry. International customers will be able to shop duty free.

"We're looking forward to the terminal and bringing our stores to the terminal," said Charles Finkelstein, president of Faber, a retail operator which will open 10 stores in the South Terminal.

HAVE PATIENCE

But initially, travelers will see a not-quite-completed terminal.

Stores and restaurants aren't expected to open for three to four months, said Patricia Ryan, Miami-Dade Aviation's division director for commercial operations.

In the meantime, temporary newsstand kiosks will be set up, as well as carts offering such items as sandwiches, chips and pastries.

"The challenge," Ryan said, "is how to provide the service while everyone is building out."

When everything is done, the hope is that the terminal will do much to change the impression of MIA from a dilapidated, dungeon-like airport, to a futuristic facility.

Said Neves: "I think it's going to change the impression the tourists have of MIA."

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