As They Lose Traffic, Once Bustling Airports Have Space to Rent

[M II A II R II K]

As They Lose Traffic, Once Bustling Airports Have Space to Rent


July 9, 2012

By JANE L. LEVERE

Read More: http://www.nytimes.com/2012/07/10/bu...imes&seid=auto

The fate of Lambert-St. Louis International Airport may be a portent for other airports serving smaller cities around the United States. Once the main hub of 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, Calif., have lost a significant amount of their business as airlines concentrate more of their flights on bigger-city airports. As airlines 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.

- Unlike airlines, many of whose assets are movable, “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.

- 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.

- Officials at Cincinnati/Northern Kentucky International Airport face many similar problems. Delta at one time operated a major hub there, 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 just 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 — United, American Airlines, US Airways and Air Canada — all moved to the same terminal as Delta, leaving the other two terminals empty.

- One bright spot for the airport has been that DHL, the global 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.

- Industry experts said they expect the challenges faced by airports grappling with unused space will continue to grow. One factor, said William S. Swelbar, research engineer at the M.I.T. International Center for Air Transportation, is American carriers’ ongoing rejection of the 50-seat regional jet, as epitomized by Delta’s new pilot agreement, under which it will remove 218 of 343 of these planes from its fleet. Delta, through its regional partners, is the largest operator of 50-seat aircraft. Airlines are increasingly abandoning these airplanes because of the high cost of jet fuel.

.....

[afiggatt]

We are likely to see in the coming years many more smaller market airports run into problems with empty terminal buildings or too little traffic & revenue to pay the bills and keep the airport in a state of good repair. The airline industry is consolidating to bigger airplanes and fewer flights to the small and medium market airports.

The NYT article writes about finding new uses for terminals and hangars. Finding a way to re-purpose an airport terminal that is on the outskirts of the city that generates enough revenue is going to be difficult.

How many small and medium market commercial airports built too much capacity in the past decade in anticipation of expanded passenger traffic that will never come? I think if oil prices climb back well above $100 a barrel and stay there, we will see a increasing number of over-extended small and medium market airports unable to pay their bills and make payments on their bonds. Either the airport authority gets bailed out or goes into bankruptcy.

Extend the flight consolidation trend out far enough and we will see small and even current medium market airports start to close, leaving many smaller cities and regions without a local commercial airport. That will have economic and political ramifications.

[M II A II R II K]

Maybe they could include stadiums and/or convention centres as part of the airports. Would make it convenient for people flying in to attend stuff like that.

[llamaorama]

I'm thinking more like conversion of unused terminals to office and warehouse space. Some company that flies people around or needs to ship things by air frequently could make do with that.

[Rail Claimore]

I say good to this, they can always sell their land for more productive uses: And on top of that, it will encourage the development of better passenger rail service, which is the mode that SHOULD be used for what many "regional" flights are used for today.

[ardecila]

New Orleans' airport is undergoing a small expansion/renovation. It's never really been a hub of any kind; traffic is driven by tourism which is unlikely to decrease.

Unfortunately, airlines have really cut back on their flights into the city; I couldn't get a round trip from Chicago to NOLA for less than $350 recently, even with flexible dates. When I do fly, virtually every seat is full, and many of the gates in NOLA are empty (annoyingly, they use the ones at the end of the concourses first, maximizing the walk).

The current construction is mostly just updating/refreshing the spaces and adding new amenities like a consolidated rental-car facility. There were a few new gates added but I think this is mostly because of airline turfs; there are plenty of unused gates in the older concourses.

[casper]

Originally Posted by llamaorama

I'm thinking more like conversion of unused terminals to office and warehouse space. Some company that flies people around or needs to ship things by air frequently could make do with that.

Unused terminals could ideally be converted into convention/trade centers. Being right next to well an airport, with in many cases nearby hotels and a road network.

[pesto]

Originally Posted by Rail Claimore

I say good to this, they can always sell their land for more productive uses: And on top of that, it will encourage the development of better passenger rail service, which is the mode that SHOULD be used for what many "regional" flights are used for today.

A decline in demand for regional travel means we should expand regional passenger railroads?

[pesto]

Originally Posted by casper

Unused terminals could ideally be converted into convention/trade centers. Being right next to well an airport, with in many cases nearby hotels and a road network.

Unfortunately, the convention business is enormously over-built and under-used as is. And with improved internet grpahics and tele-conferencing, there's little reason to believe it will boom, at least not enough to require new space.

[mhays]

I can imagine certain types of employers wanting to locate close to the airport, particularly if they can be close to transit, hotels, etc. If they can walk to the terminal that would be a huge advantage for those that travel constantly.

But the existing terminals might be very tough to turn into usable offices cost-effectively. They'd have to be separated from the airport security area. They tend to have odd layouts (skinny and long) on the terminal levels, and their ground level spaces are basically factories. With high ceilings they probably require a lot of HVAC. Realistically, the terminal sites might be more useful as land for new buildings.

Then again, selling part of your terminal sites, doesn't that suggest giving up on returning to your former volume?

Revenue from renting or selling doesn't sound very high. As landlord you'd share the buildout cost, which would likely be the equivalent of a few years' rent. Maybe over the course of a 10-year lease you'd net $200/sf. For a 1,000' x 100' terminal space that would be $20,000,000....tiny compared to the debt levels of many airports. Same with selling....that same figure might be in the right ballpark depending on the local office market and renovation costs.

As for a convention center, most terminals aren't laid out for it. The central spaces might be ok in some cases, but the concourses would be partially useless except the nearest portions would often make good meeting rooms. The hotels would like it if they were close enough, but how often are hotels walkable to the terminal? You'd be competing with the downtown convention center as well as anyone interested in drawing tourists into town.

The specifics will be wildly different per location of course.

[Rail Claimore]

Originally Posted by pesto

A decline in demand for regional travel means we should expand regional passenger railroads?

No, I'm talking about a decline in supply. Then if demand picks up again, other modes of intercity transportation might become more economically viable. CVG and MEM were artificial passenger hubs: they have no where near the population and economic base to support the hub operations they once had.

[202_Cyclist]

Originally Posted by Rail Claimore

I say good to this, they can always sell their land for more productive uses: And on top of that, it will encourage the development of better passenger rail service, which is the mode that SHOULD be used for what many "regional" flights are used for today.

Someone I know wrote a paper and gave a presentation at this year's annual Transportation Research Board meeting about substituting intercity bus instead of regional aircraft for these small/medium-hub airports.

http://www.transportation.northweste...esentation.pdf

[northbay]

Originally Posted by afiggatt

We are likely to see in the coming years many more smaller market airports run into problems with empty terminal buildings or too little traffic & revenue to pay the bills and keep the airport in a state of good repair. The airline industry is consolidating to bigger airplanes and fewer flights to the small and medium market airports.

The NYT article writes about finding new uses for terminals and hangars. Finding a way to re-purpose an airport terminal that is on the outskirts of the city that generates enough revenue is going to be difficult.

How many small and medium market commercial airports built too much capacity in the past decade in anticipation of expanded passenger traffic that will never come? I think if oil prices climb back well above $100 a barrel and stay there, we will see a increasing number of over-extended small and medium market airports unable to pay their bills and make payments on their bonds. Either the airport authority gets bailed out or goes into bankruptcy.

Extend the flight consolidation trend out far enough and we will see small and even current medium market airports start to close, leaving many smaller cities and regions without a local commercial airport. That will have economic and political ramifications.

A good analysis. This is EXACTLY why we need high speed rail to fill that need.

[tayser]

Originally Posted by ardecila

New Orleans' airport is undergoing a small expansion/renovation. It's never really been a hub of any kind; traffic is driven by tourism which is unlikely to decrease.

Unfortunately, airlines have really cut back on their flights into the city; I couldn't get a round trip from Chicago to NOLA for less than $350 recently, even with flexible dates. When I do fly, virtually every seat is full, and many of the gates in NOLA are empty (annoyingly, they use the ones at the end of the concourses first, maximizing the walk).

The current construction is mostly just updating/refreshing the spaces and adding new amenities like a consolidated rental-car facility. There were a few new gates added but I think this is mostly because of airline turfs; there are plenty of unused gates in the older concourses.

I loved both New Orlean's and Baton Rouge's airports - a breeze compared to the behemoths elsewhere in the US.

[afiggatt]

Originally Posted by mhays

But the existing terminals might be very tough to turn into usable offices cost-effectively. They'd have to be separated from the airport security area. They tend to have odd layouts (skinny and long) on the terminal levels, and their ground level spaces are basically factories. With high ceilings they probably require a lot of HVAC. Realistically, the terminal sites might be more useful as land for new buildings.

Then again, selling part of your terminal sites, doesn't that suggest giving up on returning to your former volume?

Revenue from renting or selling doesn't sound very high. As landlord you'd share the buildout cost, which would likely be the equivalent of a few years' rent. Maybe over the course of a 10-year lease you'd net $200/sf. For a 1,000' x 100' terminal space that would be $20,000,000....tiny compared to the debt levels of many airports. Same with selling....that same figure might be in the right ballpark depending on the local office market and renovation costs.

As for a convention center, most terminals aren't laid out for it. The central spaces might be ok in some cases, but the concourses would be partially useless except the nearest portions would often make good meeting rooms. The hotels would like it if they were close enough, but how often are hotels walkable to the terminal? You'd be competing with the downtown convention center as well as anyone interested in drawing tourists into town.

The specifics will be wildly different per location of course.

I agree about the prospects for re-use of terminal buildings. Not much else they can be re-purposed for without an extensive rebuild which would cost too much to be worthwhile. If the terminal has a separate security checkpoint which can be bypassed, might be able to use for public gathering/company party type events, but that would generate minimal revenue. How many people would want to have an event in an airport terminal wing? The novelty would wear off quickly.

With the road access that was built for most airports, they could build or re-purpose light industrial, low end office buildings, and storage warehouses on the airport grounds. But the airport would be competing with other office/industrial parks which are not carrying the overhead of the bonds and operating costs for the airport. If the airport is still operating, the noise will make the office space less desirable and lower rent.

A fundamental problem that most airport authorities would face with re-using much of the airport facilities is that the airports are usually located well away from downtown and the center of the city because that is where the airport had to be built. The convention center market is already saturated according to many reports. Stadiums? No, except maybe for a football stadiums, not many these days would build a baseball, hockey, basketball, soccer stadiums on the outskirts of town.

On the other hand, if the airport shuts down, the runways could be re-used for car races, speed contests, and flying remote controlled airplanes.

[afiggatt]

Originally Posted by northbay

A good analysis. This is EXACTLY why we need high speed rail to fill that need.

I would like to see a lot more high speed rail projects in the US. Much more pleasant way to travel than on airplanes these days. However, true HSR costs money, more than most people are willing to support spending - well, until their airports have only a handful of daily flights to the hub airport or shut down entirely.

What we do need is more 79, 90, 110 mph passenger rail lines connecting the smaller cities to each other and to the big cities & the major airports. Many 79 to 110 mph corridors can be built for a billion to a few billion dollars. Sounds like a lot, but we spend more than that on building and expanding airports and near empty rural interstates with nary a complaint.

Cincinnati is at or near the top of the lists of the highest average air fares of all the major/medium market airports in the US. Lack of competition will do that. If:
-the 3C (Cin-Columbus-Cleveland) passenger rail service was running and getting upgraded to 90 mph speeds,
-Cincinnati had the proposed 110 mph Midwest Regional Rail corridor to Indianapolis and Chicago,
-the rail lines to the eastern rail routes had not been torn up & there were still daily trains to Washington DC & the NEC,

those in the Cincinnati region would have a far better range of transportation options. If all those trains were running, I think it is a safe bet that Cincinnati would not be on the list of the most expensive airports to fly out of in the US.

[ColDayMan]

The problem is that Cincinnati is surrounded by way-cheaper airports (Dayton, Columbus, Indianapolis, Louisville, and Lexington) that can compete and low-cost carriers refusing to have a base at CVG due to that reason + Delta.

[MolsonExport]

there always seems to be money to expand airports (never to improve the passenger experience, which is fucking horrible most of the time) but never for HSR. curious. Repugnantcanism strikes again?

[202_Cyclist]

Originally Posted by MolsonExport

there always seems to be money to expand airports (never to improve the passenger experience, which is fucking horrible most of the time) but never for HSR. curious. Repugnantcanism strikes again?

There has been legislation proposed several times in the past few years to adopt a passengers bill of rights and the FAA reauthorization legislation that was signed into law earlier this year has elements of that, most notably airport and airline contingeny plans.

Submission of U.S. Carrier and Airport Tarmac Delay Contingency Plans to Department
http://airconsumer.dot.gov/rules/FOR...e%20-FINAL.pdf

Perhaps most significantly, under the leadership of Secretary Ray LaHood, the US Department of Transportation has implemented the three-hour tarmac delay rule to help prevent passengers being stuck onboard aircraft on runways for hours and to ensure they have food and water if they are stuck for a prolonged period of time on-board the aircraft.

New DOT Consumer Rule Limits Airline Tarmac Delays, Provides Other Passenger Protections
http://www.dot.gov/affairs/2009/dot19909.htm

[electricron]

Originally Posted by MolsonExport

there always seems to be money to expand airports (never to improve the passenger experience, which is fucking horrible most of the time) but never for HSR. curious. Repugnantcanism strikes again?

There's always money for aviation expansion because everyone flying on airlines with tickets are taxed, you might be surprised by how much. But the flying public never sees the that tax unless they take a really close look at their tickets.
Train passengers are not taxed, therefore trains depend upon grabbing a bit of funds from other tax programs, like from fuel taxes initially setup to fund highways. As long as there is no train taxes, there will not be an abundance of funds for trains lying around ripe for using.