Midway Focus In Airport Privatization Debate
Jennifer Michels/Phoenix jennifer_michels@aviationweek.com 
The jury may still be out on whether U.S. airports--and their surrounding communities--will benefit from privatization, but more are watching the proceedings with interest.
The privatization issue was debated at length Thursday during a panel at the Phoenix Sky Harbor Aviation Symposium. Catherine Lang, acting associate administrator for the FAA's Office of Airports, said the 10-year FAA pilot program that was basically designed as a way to allow airports to divert revenues to downtown projects, was--in essence--designed to fail. The only airport to make it through the process was Stewart Airport in New York, which has now reverted back to a public-use facility.
Now Chicago is taking the lead in taking Midway Airport private. It has lots of interest and bidders, she said, but during a credit crunch. "It remains to be seen what will happen."
But the Midway case has prompted several others to inquire with the FAA, she said. "New Orleans has filed initial papers with us. Midway is the litmus test, and many people are watching."
But Charles Stipancic, president and CEO of Aviation Facilities Company Inc., said the allure to privatizing an airport is when it can grow, and grow a community's revenues along with it. Midway is not one of those airports, he said, and is the wrong example. However, Branson, Mo., which is selling naming rights to the new airport and is in total control of the ground-handling and the FBO, for example, has more latitude to make it a financial success.
Branson gave AirTran "airport development rights," he said, which is the term Stipancic uses instead of exclusive-use rights, and the airline's advance bookings are looking healthy. This was extremely important in this new airport venture because it could not have the first airline fail that agreed to fly there, he said. Lang said Branson is an interesting case because it has no federal money and no federal requirements on rates and charges. "The story is not written yet. But Branson is very exciting to watch," said Lang.
The airport community overall is facing the same crisis, obviously, as the airlines. The difference between what is happening now and what the situation looked like after Sept. 11, 2001, is that back then, low-cost carriers backfilled routes left by the struggling larger carriers. "That's not happening now," said Lang. Some larger, well-managed airports simply are not attracting the capital they need to carry out projects that have been planned for years. Atlanta Hartsfield, for example, has put its international terminal project on hold.
The irony is that in the history of municipal bonds, there has never been a default, says Lang, yet airports still cannot attract the confidence of creditors. They are in a catch-22 in which the time to build is now, with construction costs dropping, while financing costs are high.
The panel also debated the merits of increasing the passenger facility charge from $4.50 to $7. Robert Montgomery, VP of properties at Southwest, said, "To increase our taxes at this point in time is insanity." And indeed 65% of the audience polled said that they believe raising the PFC to $7 will hurt the airline industry.
The FAA takes an active role in helping to control costs, and is now being more of an activist in this area, said Lang. The FAA is auditing the books of airports that appear to be trying to raise aviation funds to support off-airport projects. It has been finding instances where this was happening, and it has gotten the Inspector General interested in doing its own audits as well, she said.
But in general, airlines and airports have learned how to agree on PFC projects, and the only recent "dust-ups" have been when one airline believes a particular airport project gives a competitive advantage to another airline. "I think PFCs play an important role and will continue to in the future," she said.
How the interior of a gate area is configured and renovated is of increasing importance to airlines. Russell Chew, president and COO of JetBlue says putting concessions past the security increases spending habits, and improves an airline's ancillary revenue. People spend more money once they are actually traveling than they do in pre-travel--meaning once they are nearer the gate and cannot turn around and go back through security, they spend. "Ancillary revenue has become a huge part of how we keep our revenues up," Chew said. For example, in a JetBlue section of a terminal that looked more like a shopping mall, with the boarding gates, seats and airplanes not visible from the center shopping area, spending more than doubled during the last holiday season.
Photo credit: Chicago Aviation Dept.
