lowecur
Well-known member
- Joined
- Sep 14, 2003
- Posts
- 2,317
Well this is a big time mess, and AMR is about to take it on the chin. With the new international terminal D and $2.7B in expansion just about completed, AMR will have to pick up the cost, as per passenger costs rise from $4.24 in 2004 to $8.93 in 2008. Is it any wonder that SWA is not interested in moving over there.
AMR is moving their international gates from terminal B to D, and has rented 20 gates. The other international carriers have signed on the other remaining gates at the terminal. This leaves most of terminal B vacant also(add that to the 24 just vacated by DL). The article states that assessments will be spread around to all the airlines using the facility to make up the shortfall at the end of each year. The problem is AMR is DFW, and they will face the financial brunt of the assessments.
This begs the question, why would AMR continue to fight any carrier that wanted to establish DFW? AMR has to weigh the value of letting the competition into DFW against the extra cost of assessments by DFW. It is a no win situtation either way for AMR. Except for one Solution: Chapter 11. Who then gets stuck? The Bondholders. It ain't a rosy scenerio going forward for DFW.
Does it make sense to offer SWA a huge financial package to move? Hell yes,. $500M would be a bargain in the long run. Let's see what transpires in the next few months.
D/FW loses its bet on airline industry recovery
By Bryon Okada
Star-Telegram Staff Writer
D/FW AIRPORT - In the days after Sept. 11, 2001, D/FW officials gambled. As some airports cut back, D/FW pushed forward with its $2.7 billion expansion. In doing so, it rolled the dice, betting that the airlines would stabilize and that the industry would quickly recover.
Neither happened. Now Dallas/Fort Worth Airport faces the toughest times in its 30-year history.
"I don't think anybody knew what to fully expect after 9-11," D/FW Chief Executive Jeff Fegan said. "We knew the airlines were in significant trouble after 9-11. I can't say that any of us predicted the kinds of things that happened."
D/FW officials believed they could produce revenues that would outgrow a mountain of new costs.
But the pullout by Delta Air Lines, announced in September and to be completed Tuesday, sank revenue projections -- adding a $35 million bad guy to fiscal 2005, followed by a $50 million bad guy in fiscal 2006, and so on.
After four years of operations cuts, layoffs, pay freezes, SARS, security costs and war, it's a swath of empty gates in Terminal E that has D/FW at its most financially vulnerable since it opened in 1974, its top executives say.
"We are basically to the bone and can't cut any more -- and come next year, all the expenses come on," D/FW Chief Operating Officer Kevin Cox said.
The financial concerns are mounting:
• On Tuesday, Delta leaves 24 gates empty, and D/FW loses its elite status as one of two U.S. airports -- with Chicago O'Hare -- to boast two hubs run by large, traditional carriers.
• The $1 billion, 2-million-square-foot Terminal D, which opens in July, increases terminal space by 52 percent, but it is not fully leased.
• This year's operational budget is $494.1 million, up 50 percent from last year. Net debt service and mandatory reserves account for nearly half the budget.
• Energy costs are doubling this year.
• Debt, held below $700 million before the Terminal D expansion, is more than $3.8 billion.
• D/FW's low cost to airlines -- its biggest selling point in attracting carriers -- will more than double by 2009, according to airport consultant Leigh Fischer.
• Most of what would have been Delta's share of the debt payments will probably fall on American in the form of higher landing fees and charges.
• The Wright Amendment, which limits growth at rival Dallas Love Field, is under siege. Southwest Airlines' attempts to start long-haul service at Dallas Love Field could siphon additional revenues from D/FW.
And, having abandoned any hope of luring Southwest to D/FW, airport executives are free to express their fury at Southwest's attempts to repeal the Wright Amendment.
"The thing that bothers this industry the most is uncertainty," Fegan said. "I think the Wright Amendment presents a tremendous amount of uncertainty into the industry and into this marketplace, and that's not good."
D/FW and American have argued that uncertainty over the Wright Amendment is one factor hindering efforts to lure tenants to Terminal E.
How important are Delta's empty gates to D/FW's decision-making?
Airport officials wouldn't have considered building Terminal D if they suspected Delta was leaving; instead, they would be remodeling Terminal E, Fegan and Cox said.
"It doesn't mean we wouldn't ultimately need D," Cox said. "But we would wait to see if we got E backfilled. Otherwise we're building facilities where we have capacity that exists."
Economies of scale
For 30 years, D/FW officials have followed a simple formula: A bigger airport will bring in more passengers, which will mean airlines can spread out costs over more ticket buyers.
"Every time we have major capital improvements, over time the growth in passengers actually caused the cost per enplaned passenger to go down," Fegan said. "That has historically been the case."
D/FW gets its revenues from aviation and nonaviation sources, including landing fees charged to airlines, parking, terminal rent, use fees (such as permitting nonsignatory planes to land), concessions, utility fees to tenant companies, employee transportation, taxi rentals, and leasing portions of its 18,000 acres for cargo hangars, gas stations, warehouses, distribution centers and foreign trade zones.
At the terminals, however, D/FW was following the industry pattern of running out of space.
Before 9-11, airports made the news because of record flight delays and cramped terminals.
After soaring to 851,101 takeoffs and landings in 1997, D/FW operations leveled off. The seven-runway airfield wasn't the problem. D/FW didn't have enough terminal gate space to get any bigger. American's D/FW gate turnover -- the number of times a day that a plane pulls in and pulls out at a gate -- was at or near the top nationwide.
So D/FW embarked on its five-year expansion program. Airlines were sold on the idea that the costs would go through the roof but that additional flights and passengers would eventually drive the costs down.
But after 9-11, airline bankruptcies, the Iraq war, the SARS outbreak, increasing jet fuel prices and airline labor unrest created instability in the industry.
Still, it is Delta's departure that leaves the airport without a growing passenger base. The airport's 2005 outlook is 718,000 takeoffs and landings -- 102,000 below the forecasts before Delta announced its pullout.
That means D/FW, traditionally one of the nation's most affordable big airports for airlines, is -- for now at least -- overdeveloped and too expensive.
D/FW's cost per enplaned passenger -- an industry figure used to measure an airport's cost-effectiveness to airlines -- will rise from $4.24 in 2004 to $8.93 in 2009. As D/FW loses traffic, the cost rises.
D/FW officials had enough warning of Delta's pullout to cut $10 million from the 2005 budget. But "we don't have that revenue source," Cox said. "We don't know if we cut enough or not until we see what the actual revenues are."
Industry analysts say that after 9-11, the consensus was that -- based on what happened in the Persian Gulf War -- aviation would be down for two years.
The biggest airlines were also out making huge commitments to their labor unions and ordering up lots of new planes, resulting in today's runaway expenses and overcapacity.
But recovery has been slower. Most recent airline projections contain gloomy forecasts for 2005 and 2006.
Not a time for a hub airport to be sticking its flagship carrier with extra bills.
At a mid-January news conference of AMR, American Airlines' parent, Chief Financial Officer James Beer listed D/FW's Terminal D among "drivers of costs going in the wrong direction."
Further, if the Wright Amendment protection falls, costs to airlines operating at D/FW could be higher than expected.
American spokesman Tim Wagner said of D/FW's expansion: "This financing was put in place with the full belief that the Wright Amendment would be in place."
The Wright Amendment is a concern, Colorado-based airport consultant Mike Boyd said -- if you're American.
A second and possibly larger effect of the Wright Amendment is its protection of D/FW's international profile. Right now, D/FW is the center of a giant "hub-and-spoke" system; through D/FW a traveler can pretty much go from anywhere to anywhere.
The cheaper option is low-cost carriers using point-to-point routes. And that's great for a traveler living in, say, New York, who wants to get to Los Angeles, said Stephen Van Beek, senior vice president of policy and strategic development for Airports Council International-North America. For the traveler in Lubbock who wants to get to London, it's another story.
Lubbock doesn't have enough London-bound people to make it worthwhile for an airline to offer that flight. The successful international airport juggles numerous short-haul flights -- accumulating one passenger from Lubbock, another from El Paso, two more from Austin -- to make a London flight profitable enough, Van Beek said.
AMR is moving their international gates from terminal B to D, and has rented 20 gates. The other international carriers have signed on the other remaining gates at the terminal. This leaves most of terminal B vacant also(add that to the 24 just vacated by DL). The article states that assessments will be spread around to all the airlines using the facility to make up the shortfall at the end of each year. The problem is AMR is DFW, and they will face the financial brunt of the assessments.
This begs the question, why would AMR continue to fight any carrier that wanted to establish DFW? AMR has to weigh the value of letting the competition into DFW against the extra cost of assessments by DFW. It is a no win situtation either way for AMR. Except for one Solution: Chapter 11. Who then gets stuck? The Bondholders. It ain't a rosy scenerio going forward for DFW.
Does it make sense to offer SWA a huge financial package to move? Hell yes,. $500M would be a bargain in the long run. Let's see what transpires in the next few months.
D/FW loses its bet on airline industry recovery
By Bryon Okada
Star-Telegram Staff Writer
D/FW AIRPORT - In the days after Sept. 11, 2001, D/FW officials gambled. As some airports cut back, D/FW pushed forward with its $2.7 billion expansion. In doing so, it rolled the dice, betting that the airlines would stabilize and that the industry would quickly recover.
Neither happened. Now Dallas/Fort Worth Airport faces the toughest times in its 30-year history.
"I don't think anybody knew what to fully expect after 9-11," D/FW Chief Executive Jeff Fegan said. "We knew the airlines were in significant trouble after 9-11. I can't say that any of us predicted the kinds of things that happened."
D/FW officials believed they could produce revenues that would outgrow a mountain of new costs.
But the pullout by Delta Air Lines, announced in September and to be completed Tuesday, sank revenue projections -- adding a $35 million bad guy to fiscal 2005, followed by a $50 million bad guy in fiscal 2006, and so on.
After four years of operations cuts, layoffs, pay freezes, SARS, security costs and war, it's a swath of empty gates in Terminal E that has D/FW at its most financially vulnerable since it opened in 1974, its top executives say.
"We are basically to the bone and can't cut any more -- and come next year, all the expenses come on," D/FW Chief Operating Officer Kevin Cox said.
The financial concerns are mounting:
• On Tuesday, Delta leaves 24 gates empty, and D/FW loses its elite status as one of two U.S. airports -- with Chicago O'Hare -- to boast two hubs run by large, traditional carriers.
• The $1 billion, 2-million-square-foot Terminal D, which opens in July, increases terminal space by 52 percent, but it is not fully leased.
• This year's operational budget is $494.1 million, up 50 percent from last year. Net debt service and mandatory reserves account for nearly half the budget.
• Energy costs are doubling this year.
• Debt, held below $700 million before the Terminal D expansion, is more than $3.8 billion.
• D/FW's low cost to airlines -- its biggest selling point in attracting carriers -- will more than double by 2009, according to airport consultant Leigh Fischer.
• Most of what would have been Delta's share of the debt payments will probably fall on American in the form of higher landing fees and charges.
• The Wright Amendment, which limits growth at rival Dallas Love Field, is under siege. Southwest Airlines' attempts to start long-haul service at Dallas Love Field could siphon additional revenues from D/FW.
And, having abandoned any hope of luring Southwest to D/FW, airport executives are free to express their fury at Southwest's attempts to repeal the Wright Amendment.
"The thing that bothers this industry the most is uncertainty," Fegan said. "I think the Wright Amendment presents a tremendous amount of uncertainty into the industry and into this marketplace, and that's not good."
D/FW and American have argued that uncertainty over the Wright Amendment is one factor hindering efforts to lure tenants to Terminal E.
How important are Delta's empty gates to D/FW's decision-making?
Airport officials wouldn't have considered building Terminal D if they suspected Delta was leaving; instead, they would be remodeling Terminal E, Fegan and Cox said.
"It doesn't mean we wouldn't ultimately need D," Cox said. "But we would wait to see if we got E backfilled. Otherwise we're building facilities where we have capacity that exists."
Economies of scale
For 30 years, D/FW officials have followed a simple formula: A bigger airport will bring in more passengers, which will mean airlines can spread out costs over more ticket buyers.
"Every time we have major capital improvements, over time the growth in passengers actually caused the cost per enplaned passenger to go down," Fegan said. "That has historically been the case."
D/FW gets its revenues from aviation and nonaviation sources, including landing fees charged to airlines, parking, terminal rent, use fees (such as permitting nonsignatory planes to land), concessions, utility fees to tenant companies, employee transportation, taxi rentals, and leasing portions of its 18,000 acres for cargo hangars, gas stations, warehouses, distribution centers and foreign trade zones.
At the terminals, however, D/FW was following the industry pattern of running out of space.
Before 9-11, airports made the news because of record flight delays and cramped terminals.
After soaring to 851,101 takeoffs and landings in 1997, D/FW operations leveled off. The seven-runway airfield wasn't the problem. D/FW didn't have enough terminal gate space to get any bigger. American's D/FW gate turnover -- the number of times a day that a plane pulls in and pulls out at a gate -- was at or near the top nationwide.
So D/FW embarked on its five-year expansion program. Airlines were sold on the idea that the costs would go through the roof but that additional flights and passengers would eventually drive the costs down.
But after 9-11, airline bankruptcies, the Iraq war, the SARS outbreak, increasing jet fuel prices and airline labor unrest created instability in the industry.
Still, it is Delta's departure that leaves the airport without a growing passenger base. The airport's 2005 outlook is 718,000 takeoffs and landings -- 102,000 below the forecasts before Delta announced its pullout.
That means D/FW, traditionally one of the nation's most affordable big airports for airlines, is -- for now at least -- overdeveloped and too expensive.
D/FW's cost per enplaned passenger -- an industry figure used to measure an airport's cost-effectiveness to airlines -- will rise from $4.24 in 2004 to $8.93 in 2009. As D/FW loses traffic, the cost rises.
D/FW officials had enough warning of Delta's pullout to cut $10 million from the 2005 budget. But "we don't have that revenue source," Cox said. "We don't know if we cut enough or not until we see what the actual revenues are."
Industry analysts say that after 9-11, the consensus was that -- based on what happened in the Persian Gulf War -- aviation would be down for two years.
The biggest airlines were also out making huge commitments to their labor unions and ordering up lots of new planes, resulting in today's runaway expenses and overcapacity.
But recovery has been slower. Most recent airline projections contain gloomy forecasts for 2005 and 2006.
Not a time for a hub airport to be sticking its flagship carrier with extra bills.
At a mid-January news conference of AMR, American Airlines' parent, Chief Financial Officer James Beer listed D/FW's Terminal D among "drivers of costs going in the wrong direction."
Further, if the Wright Amendment protection falls, costs to airlines operating at D/FW could be higher than expected.
American spokesman Tim Wagner said of D/FW's expansion: "This financing was put in place with the full belief that the Wright Amendment would be in place."
The Wright Amendment is a concern, Colorado-based airport consultant Mike Boyd said -- if you're American.
A second and possibly larger effect of the Wright Amendment is its protection of D/FW's international profile. Right now, D/FW is the center of a giant "hub-and-spoke" system; through D/FW a traveler can pretty much go from anywhere to anywhere.
The cheaper option is low-cost carriers using point-to-point routes. And that's great for a traveler living in, say, New York, who wants to get to Los Angeles, said Stephen Van Beek, senior vice president of policy and strategic development for Airports Council International-North America. For the traveler in Lubbock who wants to get to London, it's another story.
Lubbock doesn't have enough London-bound people to make it worthwhile for an airline to offer that flight. The successful international airport juggles numerous short-haul flights -- accumulating one passenger from Lubbock, another from El Paso, two more from Austin -- to make a London flight profitable enough, Van Beek said.
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There are a total of 32 gates at the airport, and I believe only 4 or so are used by other airlines for regional flts, so it's not inconceivable that SWA would wind up with another 14 gates if the WA was repealed.
University for People and Inflight Training are still there for today, at least until the new addition at Headquarters is complete. Lots of stuff that still needs to be done before that 2/28 class for Inflight. I'll be interested to see if it actually takes place in the new facility. Inflight Training and University for People will move over to the new addition at Headquarters. Ground OpsTraining, as far as I know, will stay right where it is. There's really no benefit to moving it out of the North Concourse for the time being.
