At Regional U.S. Airports, Terminals Turn Quiet

July 11, 2012
As carriers continue to consolidate and cut back on the use of smaller, regional jets, airports are looking for new uses for unoccupied terminals, hangars, and other specialized buildings

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The fate of Lambert-St. Louis International Airport in Missouri may be a portent for other airports serving smaller cities around the United States.

Once the main hub of the now defunct Trans World Airlines, the airport offered as many as 475 departures a day. But now, there are just 256 daily departures, leaving half the concourses at the older of its two terminals vacant and the airport scrambling to find new, revenue-generating uses for the space.

Already, airports in Pittsburgh (a former hub for US Airways), Cincinnati (a much-downsized Delta Air Lines hub) and Oakland, California, have lost a significant amount of their business as airlines in the United States concentrate more of their flights on bigger-city airports.

As U.S. carriers continue to consolidate and cut back on their use of smaller, regional jets, more airports will be in the same difficult position - looking for new uses for unoccupied terminals, hangars and other specialized buildings.

''This is an issue many airports are wrestling with,'' said Lois S. Kramer, an airport consultant based in Boulder, Colorado, and principal author of a report on reuse of airport buildings commissioned last year by the Transportation Research Board, a division of the U.S. National Research Council. ''Nobody wants to talk about it, but vacant space at airports is more widespread than one would think.''

Unlike airlines, many of which have moveable assets, ''the airport industry is primarily a business of fixed assets, terminals, parking garages, roadways and airfields,'' Ms. Kramer said. ''When an airline vacates a terminal, the airport still has to cover the cost of operating the building and pay on any outstanding debt service.''

Airports generate revenue in two ways - through fees paid by airlines and general aviation operators and through income from parking, car rentals, concessions, advertising space sales and rentals of maintenance and other buildings.

If airlines merge, file for bankruptcy protection or eliminate flights at an airport, both types of revenue may be reduced, said Deborah C. McElroy, executive vice president for policy and external affairs for Airports Council International-North America, a group representing airport owners and operators. To deal with a drop in revenue, she said, airports have taken a number of steps, including ''personnel reductions, deferral of nonessential projects and renegotiation of existing debt obligations.'' They also ''may be forced to raise prices for services at the airport, such as parking,'' she said.

Although demolition can often be the lowest-cost option, that, too, can be expensive and out of the reach of financially stressed airports. A good example is Oakland International Airport, which, at its peak in 2007, served 14.8 million passengers but served 9.3 million passengers last year.

In 2003, when United Airlines filed for bankruptcy, it walked away from a 25-year lease, signed in 1988, for the Oakland Maintenance Center. It consolidated its maintenance operations nearby at San Francisco International Airport.

According to Ms. Kramer's report, the Port of Oakland has had trouble finding a replacement tenant that would generate comparable rental income. Nor does the port have the $4 million needed to demolish the building. The port uses the building for offices, and rents its exterior as billboard space, generating $200,000 in the fiscal year that ended in June.

While port officials declined to comment on their search for a new tenant for the maintenance building, they did say they have been able to increase general aviation operations on the north side of the airport. Michael A. Visconti, property manager on the north side of the airport for the Port of Oakland, said companies offering general aviation services paid the port rent and fees totaling $4.9 million in the past fiscal year.

Officials at Cincinnati/Northern Kentucky International Airport face many similar problems. Delta at one time operated a major hub at the airport, flying 600 of the airport's total of 650 daily departures in 2005.

Today, Delta is still the biggest carrier at the airport but offers 125 or so of the airport's 170 daily departures. Delta occupies one concourse in the largest of the airport's three terminals, and in May, the other carriers serving the airport - American Airlines, United, US Airways and Air Canada - all moved to the same terminal as Delta, leaving the other two terminals empty.

The airport is looking at its options, said Meghan Glynn, the airport's vice president for external affairs, including demolishing one or both empty terminals and moving the rental car operation closer to the remaining terminal. Ms. Glynn said that if demolition took place, it would be financed by a combination of U.S. government grants and passenger and customer facility charges.

One bright spot for the airport has been that DHL, the German shipping company, has made Cincinnati its North American hub. Since 2009, DHL has invested $105 million on its operation there, and Ms. Glynn said DHL now generates 40 percent of the airport's landing fee revenues.

Airports elsewhere have found creative ways to adapt and reuse their buildings.

Spurred by the departure of US Airways' maintenance workers, Pittsburgh International Airport, run by the Allegheny County Airport Authority, has gone into new lines of revenue-generating business.

Its own staff, which formerly maintained only the conveyor belt and baggage systems managed by the authority, now maintains the systems of every airline serving the airport. And the maintenance staff now also handles all work on passenger boarding bridges, also known as jetways, east of the Mississippi for JBT AeroTech of Ogden, Utah. This work is done out of a former US Airways cargo building.

According to Bradley D. Penrod, chief executive of the Allegheny County Airport Authority, all the maintenance work generated $4.2 million annually in 2010 and 2011, lowering rates and charges to airlines.

Rhonda Hamm-Niebruegge, the director of the St. Louis airport, said the airport was aggressively seeking new tenants. The B concourse in the airport's old terminal could be turned into ''great office space, because it's small, compact and close-in,'' she said.

The old terminal's long, one-sided D concourse is a different matter. The airport could turn part of it over to Southwest Airlines, which now flies almost half of the airport's service, should the carrier wish to further expand its operation. The concourse could also be torn down for revenue-generating parking space, now in short supply.

''As an airport, you need to go out and look at everything, things that a decade ago you wouldn't have thought about,'' Ms. Hamm-Niebruegge said. ''There is a growing opportunity to convert passenger planes into cargo planes. Does this business fit into Lambert's future? It will need large spaces. A lot of carriers are not buying new ground equipment, but are rebuilding and refurbishing it, so that's another industry cluster that's starting to grow.''

Industry experts said they expected the challenges faced by airports grappling with unused space would continue to grow. One factor is the ongoing rejection of the 50-seat regional jet by American carriers, as epitomized by Delta's new pilot agreement, under which it will remove 218 of 343 of these planes from its fleet, said William S. Swelbar, research engineer at the International Center for Air Transportation at the Massachusetts Institute of Technology.

Delta, through its regional partners, is the largest U.S. operator of 50-seat aircraft. Airlines are increasingly abandoning these airplanes because of the high cost of jet fuel.

''A large number of airports in the United States today are totally dependent on the 50-seat airplane for access to the air transportation system,'' Mr. Swelbar said. ''There are going to be some smaller airports that will not be able to sustain service over the long-term. It is therefore absolutely time for them to think about alternative uses of their facilities.''

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