New 2-Year Lease with Airlines Includes More Design Spending for $1.1 Billion Pittsburgh Airport Modernization

Dec. 21, 2020

Dec. 19—Despite a pandemic that has devastated the industry, Pittsburgh International Airport has negotiated a new two-year lease agreement with the airlines — one that includes another $50 million for the design related to a proposed $1.1 billion modernization.

The deal, retroactive to this year, replaces a 30-year agreement that was reached in 1988, four years before the midfield terminal opened.

Although the Allegheny County Airport Authority, which operates Pittsburgh International, has been trying to get the airlines to commit to another longer term lease, the two-year deal is "what made sense" given the pandemic, authority CEO Christina Cassotis said Friday.

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"The airlines have been unbelievably impacted by the pandemic. The two-year agreement works best for them as they manage all that is coming at them in this environment," she said.

Carriers have seen travel plummet sharply since COVID-19 gripped the country in March. At Pittsburgh International, traffic plunged 96% in April. It was down 65.5% in November despite the Thanksgiving holiday, which normally is the busiest travel time of the year.

So far, nine of the 11 major airlines, including the top two biggest carriers, American and Southwest, have signed the two-year agreement. Under its terms, the airlines are charged fees to pay for the operation of the Findlay airport and capital improvements.

Those charges are supplemented by non-aviation revenue such as parking and concessions. The airport also has used state grants and revenue from natural gas drilling on its property to lower costs.

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"I'm very encouraged that we got this signed in a pandemic," Ms. Cassotis said. "I think this is a vote of confidence in the region, [the authority] team and this airport. I feel really good about it."

The big news in the agreement is that those that have signed it have committed to spending another $50 million — on top of the $100 million already approved — to continue the modernization's design.

That project includes a new landside terminal for ticketing, security and baggage claim as well as 3,000-space parking garage and new roads.

In a statement Friday, American Airlines signaled its support for the latest design-related spending.

"American is excited to reach a mutual agreement to complete the design of the Terminal Modernization Program," said Patrick Bowes, manager of corporate real estate.

"We appreciate the great partnership we have with the Allegheny County Airport Authority, PIT and the entire Pittsburgh region, and we look forward to continuing to find ways to increase efficiency and enhance the customer experience at PIT as we begin to recover from COVID-19. We believe the rationale for the Terminal Modernization Program still makes sense, and we're committed to working with the airport to carefully study the project given how the world has changed in the past year."

Eric Sprys, authority executive vice president and chief financial officer, said the new lease shows support for the project. "They gave us a vote of confidence that they were willing to pay for the design."

Had design work stopped, it would have been a "big disruption," he added.

Despite the challenges still facing the airlines, Ms. Cassotis said the authority is hoping to start construction sometime next year. For that to happen, bonds would have to be floated and the carriers would have to commit to the additional costs.

"I feel comfortable and confident with the money set aside for design," she said. "It will get us to construction when everyone is ready."

Another encouraging sign, Ms. Cassotis said, is that the new lease was signed by British Airways, which won't be restarting a subsidy-backed Pittsburgh- London nonstop on March 28 as planned.

It's the third time the carrier has pushed back a resumption date. This time, it did not set a new date, leading to questions about whether the flight is gone for good.

However, Ms. Cassotis said the authority is working with British Airways on a new start date that gives it "the most chance of year-round success."

"The fact that it signed the airport operating agreement is a good sign," she said.

At Friday's authority board meeting, members also approved a reimbursement of up to $1.78 million to the Buncher Co. to install roads, sidewalks, street lights and other infrastructure at Neighborhood 91, the hub for additive manufacturing being built on airport property.

The work needs to be done quickly so that Wabtec can move into the first building being constructed, also by Buncher, next year, Ms. Cassotis said.

The board also accepted a $2 million state grant that will be used to improve cargo-related infrastructure. "We're finding that we have a place in the logistics industry and we want to do everything we can to maximize that," Ms. Cassotis said.

Mark Belko: [email protected] or 412-263-1262.

First Published December 19, 2020, 6:00am

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