Romulus — More than 14.7 million fewer passengers have flown in and out of the Detroit Metropolitan Airport this year compared to last, gutting air industry revenues and causing layoffs, buyouts and closings at businesses that support one of the Midwest's major international travel hubs.
The pandemic's blow to Metro and other airports has been worse than the impact of 9/11 — and experts say it could be at least another three years before things return to normal. Between 2000 and 2001, revenue passenger miles were down 3% globally. Right now, they are down 50% even though the pandemic occurred several months into the year.
DTW typically handles more than 1,100 flights per day to and from four continents. The number of passengers flying is down by 60% through August, according to the Wayne County Airport Authority, and revenue is off 34% as of June 30. The authority received about $142 million in grants from the federal Coronavirus Aid, Relief, and Economic Security Act for DTW. It received $157,000 for Willow Run Airport.
Airports, airlines and other industry businesses all are trying to survive a dramatic dip in travel that likely won't make a complete comeback until 2024, experts say. Meanwhile, the prospect of another stimulus package amid the final weeks of a presidential campaign is uncertain, even as the U.S. Travel Association, which lobbies for companies in the travel sector, warns that lack of additional aid could lead to the loss of 1.3 million more jobs by December.
"We hope both sides of the aisle they come to agreement and get on with that stimulus package because it's needed," said Al Haidous, a Wayne County commissioner and secretary of the Wayne County Airport Authority Board. "Some businesses, some people, some companies cannot wait too long."
Tori Emerson Barnes, executive vice president of public affairs and policy for the association, said "the whole travel ecosystem — airports, airlines, hotels, attractions, car rental — is all so interrelated that it's really important to think about that whole travel experience needing major assistance again not only from the government, but, also, we need to drive demand."
The funds DTW received from the federal government "are helping our airports meet our most immediate needs, including debt service payments and operating expenses," authority spokeswoman Lisa Gass said in a statement to The Detroit News. "However, this will not be enough to cover revenue losses through 2021. We are continuing to carefully manage our finances and identify internal cost savings."
Before the pandemic, the airport employed about 685 people. The authority has laid off 17 non-union management and leadership employees thus far. It is negotiating with unions that represent its workforce to determine any other job cuts; construction projects delayed earlier this year are back on track or rescheduled for next year; and the authority is "optimistic" right now that projects booked for 2021 will proceed as expected.
Additionally, the authority — funded by landing fees, airline fees, rental car fees and parking, among other things — has cut training and discretionary spending, is reviewing all contracts in search of additional savings, has closed some parking areas to reduce shuttle expenses, and suspended such services as valet parking that are not being heavily used during the pandemic.
"We are striving to continue delivering an excellent customer experience, despite the budgetary challenges we are facing," Gass wrote in a follow-up statement. "Some shops and restaurants are temporarily closed due to our current traffic volume. We are continuing to work with our concessionaire partners to ensure ample dining options, as well as essential products and services are available to our passengers and employees."
Mark Ouimet, a member of the airport authority board since 2016, said the airport administration immediately "understood the severity of what this was going to be as far as an impact ... to the airlines, impact to the vendors who are inside our terminals, impact, most importantly, to the people that will be most greatly affected by it."
He said the administration enacted plans to grant relief for vendors, to negotiate a line credit to ensure cash flow and to secure federal stimulus dollars — a pandemic-induced management rite being practiced across much of American business, including the country's major airlines.
Combined, American and United airlines have furloughed more than 32,000 employees nationwide. Southwest Airlines Co. asked employees to take pay cuts to avoid furloughs.
Delta Air Lines, the airport's largest carrier, avoided furloughs for ground-based employees and flight attendants after more than 40,000 U.S. employees opted for short- and long-term unpaid leaves of absences, and 20% of employees took permanent departures. But the airline is expecting a workforce reduction of pilots by Nov. 1. Ground-based employees also have seen their hours cut by 25%.
The Atlanta-based airline did not have Detroit-specific numbers for its buyout program. Delta lost $5.38 billion in the third quarter, driven in part by the cost of buyouts and a 76% drop in revenue, the Associated Press reported Tuesday. Passenger revenue was down 83% from a year ago, when Delta posted a $1.5 billion profit.
Still, the results were an improvement from the second quarter, when the airline reported a $5.7 billion loss and a decline in passenger revenue of 94%, according to the AP. United Airlines posted a $1.8 billion net loss in the third quarter on Wednesday, down from $1 billion profit a year ago.
"Airlines are all playing by the same playbook right now: raise cash and conserve cash and hope that things get better. That's really all that can be done," said Burk Huey, an aviation analyst for Morningstar Inc. "They have fixed costs that are built out for 2019 levels of traffic, but we're experiencing ... 1970s level of traffic. It's really difficult to manage that."
In August, Spirit Airlines filed a notice with the state that it planned to temporarily lay off 190 pilots and flight attendants who worked out of the Metro Airport, effective Oct. 1.
But Erik Hofmeyer, director of communications for Spirit, said Spirit and the Air Line Pilots Association reached an agreement to avoid pilot furloughs because there were enough voluntary leave offers. A similar agreement was reached with the flight attendants. Across the company, fewer than 100 employees were furloughed.
On average, major U.S. airlines had about a year to five quarters of cash on the balance sheet at the end of the second quarter, Huey said. But they are burning through those reserves at a quick rate: $51 billion in the second quarter, and a projected $77 billion in the second half of the year, according to the International Air Transport Association, which represents airlines. It's expected people will start traveling more once a vaccine is ready, but pre-pandemic levels aren't expected to return until 2024.
Local businesses suffer
Thirty-four years ago, Kurt Lenderman began loading luggage at the airport and met Dennis “Blue” Bradshaw.
“We were the same age,” said Lenderman, 63, of Flat Rock. “We thought we would leave the same day, retire the same day.”
They indeed would leave Delta about the same day — March 13 — when they took leaves of absence as COVID-19 came to Michigan and travel nearly came to a halt. Lenderman wouldn’t return, opting for a buyout to retire three years early because his wife’s diabetes could make her more vulnerable to the virus. Bradshaw, who had heart surgery a few years ago, in April died of COVID-19 in a case unrelated to work.
“That’s a tough thing,” Lenderman said. “That’s the emotional part. It threw us for a loop."
Lenderman received 26 weeks of severance and a health savings account as a part of the retirement package. He and his wife have pensions, and after consulting his financial adviser, he found an early retirement doable.
“I thought it would be more of a cash payout, but what can you do?” he said. “You always wish for the day to come, and then it’s thrown on you, and it does make things a little tough. There’s been nights I haven’t slept well.”
Amid travel restrictions that drastically limit where Americans can travel, widespread financial hardship, and fears of the virus, many are opting to stay home, take road trips, or push travel plans to next year. Travel agents in Michigan report a bumpy ride in 2020 but say they are hopeful Americans will resume travel in 2021.
"People are fearful about traveling," said Pam Nikitas, owner of Joan Anderson Travel in Detroit. "A lot of people are just saying, 'I'd like to wait until next year.'"
She's spent much of the last few months rescheduling trips for next year, and booking trips to such destinations as Aruba, the national parks, and upstate New York. In-state travel seems to have been popular over the summer.
"It's not the kind of travel where you're going to Greece for a couple of weeks, or on a cruise to Alaska, or a cruise to the Caribbean. Not yet."
None of the operating concessionaires at DTW have permanently closed, but some shops and restaurants have temporarily shut the doors because of fewer customers. For the Andiamo restaurant in the airport, the impact has been "devastating," said Joe Vicari, who operates nearly two dozen restaurants in Metro Detroit.
The five-year-old airport installation of the upscale Italian restaurant, the name for which Vicari licenses to a third-party operator there, saw no business amid a closure for the first three months of the pandemic. In June, business was down 80%; in July, it was down about 70%. It's now rebounded to about 50%, he said.
"If the economy is good and you're running at 100%, the bottom-line profit (for restaurants) is 10%," the veteran restaurateur said. "If you do $100, you make $10. So when you go down to $50, now you're making $5, but you really need to make $10 to pay everything."
While Vicari remains optimistic that air travel will pick up when cold weather hits Michigan, and other parts of his business are getting by on revenue streams such as carryout orders, he says the current climate undoubtedly will spell the end of many restaurants.
"For the restaurant industry, a vaccine can't come quick enough," he said.
Similarly, it's been a rough go for the airport business of Zingerman's Coffee Co., part of the Ann Arbor-based business group. Zingerman's Coffee is a sub-licensee on an agreement Plum Market has with a food-service operator at the Romulus airport for a co-branded storefront. The wholesale coffee roaster also supplies airport vendors.
"When the pandemic began ... the bottom just fell out," said managing partner Steve Mangigian. Business dropped by about 80% and is now back up to about 50% of normal levels.
Sales at airports across the country make up 10% to 15% of Zingerman's Coffee revenue, Mangigian said: "If you do the math, you can quickly figure out it's a small part of the overall revenue, but it's still pretty significant."
Mangigian is confident they will make it through, but the extent and timeline of the rebound are uncertain: "It's going to take awhile. I don't see us getting back to our pre-pandemic revenue levels for at least another 12 to 16 months. And who knows if we'll ever get back to 100% because a few of our customers have just gone out of business."
Widespread impact
Overall, the airport has an economic impact of $10.2 billion annually. Not only is it a huge economic driver and job creator, the airport's presence here also spurs investment, Detroit Regional Chamber CEO Sandy K. Baruah said.
"Companies want to move to a place that has connectivity and having an airport that is as large, and as well run, and as frankly as attractive as DTW, is a huge economic development tool that those of us who are in that business are very grateful for," Baruah said.
Land near the airport is still being snapped up for industrial warehouse and fulfillment centers, said Chris Girdwood, executive director of the Detroit Regional Aerotropolis Development Corp. The Kroger Co. in partnership with British online supermarket Ocado is investing $95 million for an automated warehouse facility in Romulus, the first brick-and-mortar grocery facility in the city in a decade.
The green space by Detroit Metro Airport is prime for industrial development: Ross Perot Jr.’s Hillwood Development Co. LLC purchased 640 acres; a Kansas City developer picked up another 200 acres; and a local developer purchased 500 acres within the past six months to a year for industrial facilities being built on speculation.
“We were a sleepy agricultural community around here,” he said. “We’re going to continue to diversify and protect ourselves against external shocks.”
———
©2020 The Detroit News
Visit The Detroit News at www.detnews.com
Distributed by Tribune Content Agency, LLC.
