The Wall Street Journal
By Paul Berger
Updated March 8, 2018 1:04 p.m. ET
A fierce competition between airlines, private equity, developers and terminal operators is nearing its climax as the Port Authority of New York and New Jersey advances a $10 billion plan to overhaul John F. Kennedy International Airport.
Several companies, including private equity firm Oaktree Capital Management, developer RXR Realty and Spanish infrastructure group Ferrovial SA, are vying to partner with JetBlue Airways Corp. to expand the airline’s operations beyond its hub at Terminal 5. Oaktree, RXR and Ferrovial declined to comment.
The winner of that contest, which is expected to conclude in the coming weeks, must then wait as the Port Authority weighs bids from a handful of other airlines and private companies that submitted plans to expand their own cramped or outdated facilities. A decision is expected this summer.
JFK has six terminals, each of which is managed by individual airlines or terminal operators. The Port Authority has budgeted $1 billion for the airport expansion, with the expectation that the private sector will provide the remaining $9 billion.
There will be winners and losers. At stake is a larger foothold at one of the nation’s busiest airports and the international gateway to New York City where passenger traffic is forecast to exceed 100 million people a year by 2050.
“This is prime real estate,” said Jeff Goodell, vice president of government and airport affairs at JetBlue . “There are not unlimited options for development of terminal facilities” at JFK.
Each airline or operator is bidding to invest billions to expand and improve terminals. In return, they hope to generate profits through fees and charges on airlines and commercial tenants.
It is also an opportunity to control a larger area of the airport.
On the north side of the airport, JetBlue aspires to redevelop the former Terminal 6 site, which was demolished in 2011, and, potentially, to expand into Terminal 7, a hub for British Airways . A spokeswoman for British Airways said the airline will remain at the terminal until at least 2022, when its lease expires. She said the airline is reviewing options with the Port Authority, including a British Airways “redevelopment of T7.”
To the south, the private operators of Terminals 1 and 4, the most congested facilities at the airport, face a turf war over the chunk of land that sits between them.
JFK Turf War
Airlines and terminal operators compete for the right to expand.
The Port Authority will be the ultimate arbiter, deciding which plans are approved and the order in which development will proceed. The Port Authority’s aim is to physically link up the Balkanized terminals and to create a unified airport that gives passengers a uniform experience.
“The race is to the swift,” said Rick Cotton, Port Authority’s executive director, who explained that the agency would favor projects that move the fastest and provide the greatest value to the airport.
The competition comes one year after a panel convened by New York Gov. Andrew Cuomo called for an overhaul of the airport’s cargo facilities, roadways and terminals.
Because each of the terminals has a different operator, JFK is notorious for a lack of communication and cooperation among the agency, airlines and terminal operators.
That lack of control was laid bare in January when the airport was overwhelmed by a winter storm. Over several days, airlines continued sending aircraft to the airport, where some terminals failed to cope with the influx of passengers. Thousands of people were stranded on planes or in terminal buildings for hours. Luggage went missing for days.
Mr. Cotton said that as the Port Authority negotiates new leases, the agency will demand higher standards of communication, coordination and passenger experience from terminal operators.
But plans for the airport’s redevelopment can seem like a game of musical chairs. For some terminals to expand, operators may need to shift airlines to other gates or terminals. That ends up pitting different airlines and their partners against one another.
Terminal One Group, a consortium of four airlines, has teamed up with private equity firm Carlyle Group LP to extend Terminal 1. Their plan is to expand eastward through Terminal 2, a hub for Delta Air Lines Inc.’s domestic flights, and across the former site of Terminal 3, which is used as a parking lot for Delta aircraft.
That puts them in competition with Terminal 4, a Delta hub which has plans to expand west across a similar footprint. The terminal is operated by JFKIAT, which is owned by a joint venture led by Netherlands-based Royal Schiphol Group, with Delta as a minority stakeholder. The airline and JFKIAT declined to comment.
Glenn Youngkin, a co-chief executive of Carlyle Group, said whatever the outcome, airport-wide development will only work if all parties cooperate. “In order to make anything like this work in a complicated ecosphere like JFK, everybody is going to have to partner on this,” he said.
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