Airlines protest cost, timing of Sacramento airport expansion plan
By Tony Bizjak -
tbizjak@sacbee.com
Published 12:00 am PDT Tuesday, May 13, 2008
Story appeared in METRO section, Page B1
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Sacramento officials, under pressure to launch a major airport overhaul this summer, have run into a last-minute snag – a mass airline protest over the size and cost of the expansion.
At least 11 airlines, including Southwest, the dominant carrier in Sacramento, have sent letters since Friday expressing concerns about the $1.27 billion project.
"The Sacramento plan doesn't do anything for Southwest Airlines except raise our costs," airline executive Ron Ricks complained. "If Sacramento goes forward with this plan, given all the other economic headwinds the (airline) industry faces, it will lead to a reduction in flights and much higher airfares."
Executives from several airlines say they will ask county supervisors today to back off a plan to substantially increase airline rents and user fees.
The county is considering doubling airline fees over the next four years to help finance a new terminal and other facilities.
Leading airlines, including United, U.S. Airways, JetBlue and Continental, say they agree Sacramento needs to modernize its airport, but they complain the plan wallops them in the pocketbook at a moment of historic economic uncertainty for the aviation industry.
"Our position is please don't do this," Southwest's Ricks said. "We are not saying shelve your plans forever. It would be prudent to see how this shakes out."
Sacramento airport officials counter that the county needs to move forward now, and they are determined to remain on track for a summer groundbreaking.
Each month of delay could increase costs by $10 million, airports director Hardy Acree said.
County officials say they face a time pressure of their own. Federal officials intend to redraw flood maps for the Natomas basin soon, effectively placing a moratorium on new construction. The airport project needs to be under way this year to ensure that it won't be shelved indefinitely.
Acree insists the airlines can afford the proposed fees, but he acknowledged it means they might increase ticket prices.
"You have to take the long-term view," Acree said. "We're building a new airport for the next generation of Sacramentans. This is an investment the airlines should be making."
Jimmie Yee, chairman of the Board of Supervisors, backed Acree, saying the airlines want the county to go cheap, but Sacramento deserves "an airport we'll be proud of."
Supervisor Roger Dickinson said Monday he's seen the airlines' letters but supports expansion now.
"I don't believe (the airlines') success or failure rides on our adjustment of fees," Dickinson said. "I respect their view, but we have been prudent and, in the interest of Sacramento, we need to move ahead."
An effort by the airport and airlines to negotiate a fee settlement failed last month.
County officials sold a half-billion dollars in bonds two weeks ago to finance initial construction costs and say they received lower interest rates than expected. An official with one key bond rating agency said his office is watching the situation in Sacramento with interest, but not alarm.
"Moody's has some concerns about the current state of the relationship between the airport and airlines," said Kurt Krummenacker of Moody's Investors Service, which rates airports' credit-worthiness. "At the end of the day, we look at the strength of the (Sacramento) travel market, which has shown strong wealth levels and population growth, as well as a resilient economy."
The county's proposed fee structure will, however, put Sacramento well above national averages, industry officials said, and could put Sacramento among the more expensive airports for airlines in the coming years.
Currently, airlines pay airport fees and rents equal to about $6 per passenger.
Supervisors will consider raising that to $9 effective July 1. Airport officials say they expect to raise airline fees to $13.63 per passenger by 2013 to help finance the expansion.
Airports typically charge higher rents and fees during expansion projects, industry watchers say, then relax fees as debts are paid.
Federal law allows the county to unilaterally impose fees, as long as they are reasonable and are used to operate or expand the airport.
The airport also recently increased parking fees to help finance the expansion.
The centerpiece of the expansion will be a four-story, glass-and-steel terminal to replace the old and undersized Terminal B.
Nine-year-old Terminal A will continue to be used.
The new terminal would be topped by a hotel tower and connected to a separate concourse building via a people-mover tram.
Airport officials also plan a second multilevel parking garage.
Airlines are reeling from an unprecedented rise in fuel costs.
Several air carriers have gone out of business in recent months, including Aloha, which did business in Sacramento.
Fuel prices now account for more than one-quarter of airline costs. Rents and fees account for roughly 6 percent, according to figures from the Air Transport Association of America.
In an effort to reduce costs, Southwest officials said they are canceling four daily Sacramento flights to Southern California cities. Other airlines are announcing flight reductions at airports nationwide, and three other major airlines increased fares $20 nationally last week.
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