Tuesday, July 18, 2017

What are the ups and downs of making Lambert-St Louis International Airport (KSTL) private?



St. Louis Lambert International Airport doesn’t have the crowded terminals of a hub, but things have been looking up.

Last year, nearly 14 million passengers came through the airport, a 10 percent increase over 2016 and the most passengers since 2008.

“We’re pretty pleased with the direction,” said Airport Director Rhonda Hamm-Niebruegge.

The numbers poured in at a recent Airport Commission meeting.

Connecting flights are up 28 percent so far this year, mostly because of Southwest Airlines. Hamm-Niebruegge said that’s likely to translate into 1.5 million more passengers coming through Lambert this year.

And officials with the airport and the city comptroller’s office were thrilled with the recent sale of $258 million in bonds.

That’s because refunding bonds at a lower interest rate will save the airport about $35 million, or around $4 million a year. That savings is helping the airport lower per passenger fees, which Hamm-Niebruegge said will make it more profitable for airlines to fly into Lambert.

“In the end that’s what the game is, it’s being able to produce revenue on the flights that operate through here,” she said.

Yet just above all the talk of positive momentum, there’s an effort circling to privatize Lambert.

Why privatize?

The city of St. Louis owns the airport.

Just a few weeks before leaving office this year, then-Mayor Francis Slay announced the city would apply for the Federal Aviation Administration’s privatization pilot program. The FAA accepted the preliminary application in April.

Grow Missouri Inc., a non-profit group supported by billionaire financier Rex Sinquefield, is paying for the full application process and a marketing effort, called Fly314.

President Travis Brown said it’s about exploring ways to make a good airport better.

“What are the kinds of strategies that might work better for region to increase airport revenue from the existing operation?” he asked.

Brown said there might be ways to increase revenue from concessions and other non-flight operations, as well as to attract international investment for capital projects. He points to the $1 billion runway that has seen little use.

And, he said, leasing the airport would allow the city to use revenue from the airport for other city projects.

In former Mayor Slay's initial announcement of the application, it touted that private management would "free up" airport revenue, while the city would still own the airport.

"[U]nder a public-private partnership, the city would receive an immediate capital infusion for non-airport uses or the city also may choose to receive substantially increased annual payments," the news release said.

How has privatization worked at other airports?

The FAA Airport Privatization Pilot Program began in 1997.

Since then, only two airports have privatized as part of the program. Today only one remains — the Luis Munoz Marin International Airport in San Juan, Puerto Rico.

(Stewart International Airport in Newburgh, New York, became the first commercial service airport to participate in 2000. But in 2007 the British company that was operating it sold it back to a public entity, the Port Authority of New York and New Jersey.)

Six other airports, including Chicago Midway International Airport, have started the application process but then later withdrew.

Airport consultant David Plavin, who also serves as a board member on the Eno Center for Transportation, said part of the reason privatization has been slow to take off in the U.S. is that municipalities are generally reluctant to give up control of their airports.

“They are the symbol of the community, they’re the first thing visitors see when they arrive and the last thing they see when they leave,” he said. “So the idea this is a service rendered by the local government apparently carries a lot of weight.”

Plavin said many more airports in the United Kingdom and Europe have been privatized, in part, because national governments are looking for ways to save costs. But in the U.S., airports are usually owned by municipalities and generate their own revenues through concessions, parking, and per passenger fees.

Plavin said that structure remains even with a private operator, but one big difference is cities can then use some of the revenues elsewhere.  He said the question that municipalities need to consider is how much leeway they’re willing to give a private entity in order to get those revenues.

“I mean they could conceivably take it and run it into the ground in order to milk it for revenue unless the municipality retains some kind of oversight,” he said.

What’s next?

So far, most St. Louis officials aren’t sharing their thoughts on the idea of privatization.  

Mayor Lyda Krewson has said that a public-private partnership is an opportunity worth exploring, “but as always, the key is in the details.”

The application process with the FAA is expected to take up to 18 months.

Even if there is interest from private investors, for a plan to go forward it would need lots of approvals. That includes from the Board of Aldermen, the Board of Estimate and Apportionment (made up of the mayor, the board president and the comptroller) and possibly even voters.

The airlines that fly into Lambert would also have to give their okay.

In other words, privatization is a long way from landing at Lambert.

Listen to the radio version here:  http://news.stlpublicradio.org

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