Will Air Cargo Save MidAmerica?

Ten days after losing yet another passenger service at MidAmerica St. Louis Airport, Mark Kern predicts that 2006 will be a record revenue year for the troubled, taxpayer-funded operation.

While Kern, the chairman of the St. Clair County Board, said it is unlikely that MidAmerica will turn a profit in the year ahead, a "business model" involving air cargo from foreign locations will soon be launched. He said the plan will eventually lead to profitability.

"International cargo is going to transform Southern Illinois into something that many cannot imagine today," Kern said Thursday at the airport.

"This is going to be big," he said, "And we believe it's going to occur."

Kern also stresses the importance of continued joint use with Scott Air Force Base, a key military operation that gives an estimated $2.2 billion boost to the metro east economy. The civilian airport facilities greatly increase the base's value to the military and have kept it off base closure lists, local leaders have said.

"We're running this operation like a business. And we believe joint use is the No. 1 priority. We've got international cargo and we've got passenger service. These are three opportunities we can use to bring dollars and revenue into this airport."

Not everyone agrees

Doubters include Mike Boyd, president of the Boyd Group Inc., an Evergreen, Colo., aviation consulting firm with 20 years of experience.

"This isn't pie in the sky, it's fruitcake," Boyd said of the MidAmerica international cargo idea. "The only way it will work is if you first have customers that want this. And they don't."

Boyd said he understands that local leaders have to find some way to make money at the airport, which cost $310 million to construct. He suggested instead that they look toward broadening charter service.

But Kern says he is undeterred by such pessimism.

"You're seeing a reasoned business model. This isn't pie-in-the-sky," he said.

And for those St. Clair County taxpayers who worry about the day when unpaid airport construction bonds and huge bond interest payments owed by the county come due, Kern said, "I don't see in the foreseeable future a need for a tax hike."

When asked to define "foreseeable future," Kern responded, "I don't anticipate a tax hike because of the airport."

Opportunity abounds

Despite a rash of bankruptcies across the United States for airlines big and small including TransMeridian, which on Sept. 30 canceled its MidAmerica-based Florida run and left local passengers stranded, Kern and airport director Tim Cantwell said opportunity abounds.

For next year, they predict:

50,250 passengers split about equally between runs to Las Vegas, currently provided by Allegiant Airlines, and a reinstituted service to the Sanford-Orlando area in Florida. That would be more than double this year's passenger total.

The full rental of a new 50,000-square-foot cargo storage area with 37 truck loading docks set to open on Oct. 17. This would provide a gross income of $280,000.

The first international cargo customers will begin to off load merchandise in Mascoutah to be shipped by truck or rail to customers in a "catchment area" that includes Chicago, Dallas and Louisville.

Increased fuel sales, which this year provided $385,000 in profit. Cantwell said the airport's 2005 revenue of about $800,000 to more than $1 million will be a record, with much of that coming from rental of surrounding airport property to local farmers.

But when it comes to estimating this year's airport operating loss, both Kern and Cantwell said that until the annual airport audit comes out, probably this week, they cannot give an accurate figure.

The private audit for 2003 reported that the airport lost $5.2 million in operating costs such as salaries, gasoline, supplies and utility fees. The county had to transfer $4.6 million from its general fund to cover that loss, which diverted money from uses such as road repair or sheriff's department overtime.

Kern estimated that for 2004, the latest audit period, the amount that was transferred from the county's general fund to offset losses was $2.4 million to $2.8 million.

Transfers from the county's general fund have not resulted in hikes in the tax rate, county leaders maintain.

Big plans for cargo

Kern and Cantwell's international cargo plan has supporters including Democrat Kern's primary political rival, Steve Reeb.

"I've said all along that cargo is the way to go," said Reeb, a Republican County Board member who ran against Kern for the chairmanship in November.

Don Bennett of O'Fallon, the former director of Lambert-St. Louis International Airport, said international cargo could work.

"The location is great for that. And that sort of hub would work fine, because you're not going to make any money on domestic cargo," Bennett said. "That's going to go to Lambert because the customers are over there."

Kern, who inherited the airport challenge less than a year ago when he became county board chairman, remains optimistic despite a dwindling airport cash reserve listed at $32.5 million in the audit covering 2003.

The cash reserve started at about $50 million and was created to help cover airport operating losses and bond interest payments.

The county borrowed $50 million to cover airport construction costs while awaiting payment from the federal government. When the federal payment came in, the county decided to invest the money and pay the debt off later. The invested amount is the reserve fund.

While the debt could theoretically become a big problem if the airport never turns a profit, county leaders have said that is unlikely.

"I worry when so many negative stories come out about MidAmerica," Kern said. "I worry that the real story (of business opportunity) is getting lost in the shuffle."

Contact reporter George Pawlaczyk at gpawlaczyk@bnd.com or 239-2625.

Belleville News Democrat

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