By Debby McElroy
At Tuesday morning’s World Business Partners/Associates Business Breakfast and Airport Directors Roundtable there were some fascinating insights into the challenges smaller airports face in managing their capital programs.
Passenger growth in the United States during 2000 – 2010 was only 8 percent, while real GDP was double that rate and population growth was 10 percent, according to Bob Hazel, a partner with Oliver Wyman. But that growth was uneven, with medium airports hurt more than other hub sizes. The story was much better in Canada, where passenger growth totaled 27 percent over the same period, with just a bit more real GDP and population growth than the U.S.
Greenville-Spartanburg International Airport had a terrible decade prior to Southwest Airlines beginning service in March 2011, said CEO Dave Edwards. But traffic is now up 42 percent for September 2011 compared with the previous year. And, it is not only Southwest that is benefiting. Delta Air Lines traffic is up 25 percent, American Airlines is up 22 percent and US Airways is up 15 percent. Another important benefit has been fare stability which significantly reduced leakage to Charlotte International Airport, Edwards said.
The airport is in the enviable position of not having to issue debt to pay for their $100 million terminal expansion project which will begin in 2012. Edwards noted the importance of having a functional design that allows you to get “a good, comfortable airport.”
The defederalization process for Canadian airports in the early 1990s left airports with years of avoided, but necessary capital improvements at the time of the transfer, said Tom Ruth, President & CEO at Halifax International Airport Authority. In the first five years of local control, Halifax spent C$250 million for infrastructure work. Most recently Halifax issues C$135 million in debt. Due to Halifax’s A+ credit rating, the 40 year bullet bonds had the lowest coupon rate for any Canadian airport, he noted.
Tulsa International Airport’s diversified air service has prevented “the wild swings” that have been experienced at other small airports, said Jeff Hough, deputy director of engineering and facilities. He emphasized the partnership between the airport and airlines, car rental companies and concessionaires, which has led to stability and success in funding much of their capital needs. The airport is now “stretching the pain” over 10 to 15 years with their terminal building renovation, using PFC funds and a “pay as you go” plan.
There were a lot of nods among the breakfast attendees when Hough mentioned the problems caused by not having a long-term FAA reauthorization bill enacted into law. Calling the lack of FAA funding “the huge wildcard,” he talked about the difficulty of replacing their 30-year old runway at a cost of $75 million under this dysfunctional system. But creativity reigns supreme in Tulsa as the airport authority is funding an observation area at their reliever airport with donations and selling reconfigured old taxiway lights (that were replaced by LED units) as desk lamps.