A Sense of Place: Sea-Tac's role in the aviation system, and in its region, is about to be realized

    Sept. 8, 2003
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    A Sense Of Place

    Jodi Prill - Associate Editor

    Sea-Tac's role in the aviation system, and in its region, is about to be realized

    SEATTLE, WA - It's hard to not be wowed by the majesty of Mt. Rainier in the distance here. However, when airport officials cut the ribbon in 2004 to open the newly remodeled South Terminal at Seattle-Tacoma International Airport, it will be the first time visitors inside the airport will have an unobstructed view of the 14,000-foot volcano. Integral to the ongoing $2.4 billion capital improvement project is giving travelers the sense that they are truly in the Pacific Northwest. At the same time, the airport is achieving infrastructure goals that will ensure its role in the future U.S. air transportation system.

    It's easy to see what drives airport director Gina Marie Lindsey, ACI-NA Chair. Just ask her about the revitalization going on at the airport. "It's going to be a fabulous terminal," Lindsey says with excitement. "People are going to like being here."

    The capital development project Sea-Tac undertook involves some $2.4 billion in renovations to the terminal, airfield, and a new third runway.

    According to Dave Soike, CIP director, the airport was redesigned in the '70s for 25 million passengers annually, which is currently being exceeded. "It's time to renew the place," he says. Phase One of the CIP is made up of seven programs:

    • Third runway. Originally budgeted at $800 million, delays caused by opposition from local residents and environmental groups has caused the cost to soar to more than $1 billion.
    • Train system. The current rail system at SEA is some 30 years old - so out of date that maintenance workers were manufacturing their own replacement parts because the cars are no longer manufactured. The new system features Bombardier cars, enlarged stations, and wider doors. It is currently more than 70 percent complete and will finish 20 months ahead of schedule and $5 million under budget, according to Bob Parker, media officer.
    • Terminal and tenant program. Includes remodeling of restrooms, updates in architecture, and seismic strengthening.
    • Airfield improvements. Replace-ment of pavement at jetways - the existing concrete was some 50 years old, according to Soike, as well as new runway lights and a fuel hydrant program involving piping that runs underground.
    • STEP (South Terminal Expansion Project). Includes the complete rebuild of Concourse A which will feature 14 gates, moving sidewalks, an art program, an international arrivals hall, and a myriad of concessions, all with a spectacular view of Mt. Rainier. This portion is valued at $575 million and is expected to be completed mid-2004.
    • Central Terminal Expansion. Expected to cost $130 million, the newly created area will provide a mall atmosphere for travelers to shop and dine with a view of arriving and departing aircraft. Completion is set for early 2005.
    • Other infrastructure. The "non-sexy stuff" according to Soike, includes cooling, heating, electric, water, and sewer updates.
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    Gina Marie Lindsey, Sea-Tac director and ACI-NA chair

    Runway challenges
    The most challenging aspect of the CIP has been, by far, the construction of a third runway. If the airport had been allowed to go ahead with the construction in 1997 as planned, it would have cost some $587 million. Today, after several legal battles with local opposition, an extensive buyout program of the homes that were displaced because of the runway, and extensive mitigation, the investment is expected to top $1 billion.

    In terms of mitigation, as Parker explains, the airport purchased some 500 acres to make room for the additional runway. While much of this land was residential, the airport is nonetheless being required to mitigate at least 20 acres of land for the displacement of the wetlands, which includes establishing a habitat for birds in nearby Auburn, WA.

    "We're not talking pristine wetland," Lindsey says. "These are urban ditches that will be in much better shape when we are finished with the runway project than they have been in the last 20 years. The interesting thing is it's not really environmental groups, it's the NIMBYs (not in my backyard) [who are heavily against the third runway]. They're just using the environmental process as the mechanism by which to slow things down."

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    The South Terminal Expansion Project is slated for a mid-2004 completion.

    Airport officials are quick to point out that the runway, unlike at other airports, is not intended to increase SEA traffic. "Our two runways are only 800 feet apart," Parker explains. "We only need two runways, but we need two runways in all weather. Forty-four percent of the time clouds are low enough that the tower can only bring in one stream of aircraft. So, even with reduced traffic since 9/11, 20 percent of flights are off from their published times." These delays cost the airlines an estimated $120 million annually ($180 million per year, pre-9/11). Parker adds that with these statistics it will take less than ten years to offset the cost of the runway.

    "We'll get this done," Lindsey says, "although at a very high cost." Barring any further delays, the airport is anticipating the runway will be completed by November 2008.

    Retail With A View
    The retail redevelopment at the airport is seen as a focal point for the administration team. As Lindsey explains, the airport model has changed over the years to allow for more capitalization of the terminal space. The redesign maximizes this as Sea-Tac's 40-year contract with master concessionaire HMS Host comes to an end.

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    The Central Terminal
    Redevelopment (below) will offer travelers a myriad of retail options.
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    According to Kottayam Natarajan, Jr., aviation business development GM, the airport started the renovation by changing its retail model. Instead of a single master concessionaire, the airport will have several prime concessionaires, offering more choices to travelers. Among the retailers, Hudson Group will operate 22 news and gift stands, the Seattle Restaurant Associa-tion will have eleven operations, HMS Host will continue to manage 30 venues, Concessions International will manage nine locations, and there will be another eleven independent retailers. The new Central Terminal layout will offer the airport 50 percent more square footage of retail space.

    Under the revised lease structure, retailers will be required to build out their own operating space, under the supervision of the airport. Rent is based on a percentage of gross sales, with a minimum annual guarantee, says Natarajan. Another key feature of the program will require that all vendors offer street pricing. "Services at airports aren't just gates and parking," he says. "We're providing an entire experience and passengers are now happy to have some time to kill and the prices are right."

    Cost Of Improvement Financing a project of this magnitude is a challenge in itself. According to Mark Reis, deputy managing director, some 60 percent of the funds necessary will be borrowed in the bond market. Passenger facility charges (PFCs) make up 20 percent; airport improvement program funds and other grants (including the recent letter of intent for security cost reimbursement) total some 10 percent; while the remaining 10 percent is covered by airport funds. "We've been pretty aggressive and creative on the financing side," Reis says. "As we fund the program, we have two objectives: find the cash; do it as reasonably as possible." Lindsey agrees. "Our challenge is to keep our costs as manageable as possible because airlines are charging less and less money for tickets. The ability for the system to continue to grow as it had been growing in the last ten to 15 years has been challenged by the events of 9/11 and what happened after that. The business model for airports is changing and it's challenging us here at Sea-Tac because clearly our capital program is an expensive one. And yet we've got a carrier base that doesn't have a lot of money. It's a challenge." Since 9/11, $250 million has been cut or deferred from Phase One of the CIP, which included additional restrooms remodeling and an update to the paging system. "We did that not because it wasn't painful, but because it was more important to try to mitigate costs for the airlines," Reis says. Sea-Tac is among the first airports to receive an LOI from the Depart-ment of Homeland Security for construction of an in-line baggage screening system. The $159 million is 75 percent of the estimated cost of designing and installing the three systems that will be in the Central Terminal, South Terminal, and the North Satellite of the airport.
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    As ACI-NA Prepares To Meet, Chair Lindsey Targets Changing Airport Business Practices

    The 12th Annual Airports Council International-North America Conference and Exhibition will be held in Tampa, FL, September 14-17. Gina Marie Lindsey, ACI-NA chair and aviation director at Seattle-Tacoma International Airport, expects much of the discussion to focus on industry regulation, AIP reauthorization, relationships, and security.

    "Airports have a strong interest in having a much less regulated environment," Lindsay says. "I think we're totally in favor of all the necessary regulations for safety, nondiscrimination, security, etc., but there's economic regulation of both airports and airlines that I'm not clear is necessarily productive. The major airports were set up to be a quasi-business enterprise. We all have a government responsibility, we have a public responsibility, but we also have the responsibility to live with our own bottom line.

    "Somehow over the years there's been something of an adversarial relationship, mistrust, and a sense of suspicion that has developed between the major factions of the industry. That's not productive... The Federal government clearly can't run the businesses - the airports or the airlines - but it does have a significant and justifiable role in determining and regulating what is necessary to provide a national system of aviation. Sometimes inefficient relationships can be perpetuated and sustained if there's lots of money; there's not a lot of money anymore... Our practices that let us operate under that old model are going to have to change if we're going to survive. I think we're at a crisis time in the industry. And it's not just crisis time because the airlines are having a difficult time making payroll.

    It's crisis time because our way of conducting our business needs to fundamentally change.

    "The Airport Improvement Program was up this year for reauthorization. There was a hope at one point that we [ACI-NA] might be able, through that reauthorization, address some fundamental issues: What role should the airports have? What role should the airlines have? What role should the government have? Now we're pretty far along on the AIP bill through conference, so I don't think that's going to be a revolutionary mechanism we hoped it might be, but that's okay. We're still going to need to make these industry changes, and if we can't do it through the AIP reauthorization bill, then we'll have to do it through other mechanisms.

    "Security is going to be a continuing discussion. Partially because we all have to respond to today's alligator that's grabbing our leg. I can have all sorts of strategic things on my calendar when I walk in in the morning, but when I see a double stacked line at B Checkpoint, that's what becomes my focus."