The Ghost Of Airport Terminals Yet To Come
When the Kansas City International (MCI) Airport Advisory group begins it public meetings in Johnson County, Kan., early next year, the Aviation Department will continue its pitch for a new $1.2 billion terminal. The Aviation Department will denigrate the current state of MCI, as it did in the “fact-finding” tour given to the Airport Advisory group. The department also will likely downplay the immense debt that the new terminal will demand and that debt’s impact on MCI’s finances and competitiveness. The Show-Me Institute has written why the Aviation Department is mistaken in downplaying these aspects, but now comes a very similar example: Sacramento International Airport.
Perhaps to make up for stealing the Kings, Sacramento has decided to show Kansas City the pitfalls of expensive airport terminals. Sacramento opened a new $1 billion terminal in 2011. Like Kansas City, Sacramento wanted to attract more airlines and passengers with a state-of-the-art facility. Like the Kansas City experience, the terminal:
…drew rave reviews from local business leaders and politicians…the project was criticized by airline executives, including those at Southwest, as too big and too expensive for their needs.
Despite the criticisms, the Sacramento County Airport System decided to build anyway. This gave the airport a high debt load and made it one of the most expensive medium-sized airports in the nation, a dubious honor that will belong to Kansas City if its new terminal plan takes flight.
The hopes that a state-of-the-art terminal would attract more passengers to Sacramento’s airport have not materialized. Passenger traffic fell from 2011 to 2012. But because of the increased debt, the airport had to increase landing fees. Airlines’ concerns, especially those of Southwest, over the increased expense of using the airport has led to an impasse over a new airline lease agreement.
The inability to increase airline service and need to make significant payments has put the airport into a financial bind. In April, Sacramento’s airport executive was replaced and his successor was given “marching orders to improve airport finances.” As the Sacramento Bee reported this week:
Faced with declining passenger levels and high debt, Sacramento International Airport officials say they plan to cut airport system costs by 15 percent over the next 18 months.
While that will save the airport about $14 million, the airport’s management claims that it must further increase parking fees and work with a developer to build a new airport hotel.
The managers of Sacramento International Airport made a $1 billion mistake. Their experience shows that, even with large airports, debt payments and competitiveness still matter. Just as in Kansas City, Sacramento officials downplayed critics like Southwest and took on significant debt to build a new terminal when cheaper options would have sufficed. Sacramento County Supervisor Jimmie Yee said of the airport’s new terminal, “What’s done is done…” But it is not done in Kansas City.
