The conversation with [Southwest Airlines chief executive Gary] Kelly, which [Mayor Sly] James initially denied but Southwest confirmed, happened early in the week. James, through a spokeswoman, said the conversation was about cost sharing among airlines for a baggage handling system at the KCI terminal, a $20 million element in the project but a fraction of the overall cost.

I don’t know why the mayor would have initially denied speaking with an executive at Southwest. However, it is the sort of tactic that proponents of the new single terminal have been employing since the very beginning. Remember that proponents of the new terminal told us that there is no correlation between ticket prices and the fees airlines pay to fund airports. But Spirit and Allegiant Airlines have made it clear there is a connection.

Then we learned the price for the terminal was going way up. Cat Reid’s story on November 1 for KSHB indicated that this wasn’t a big deal for the airlines:

The director of the Kansas City Aviation Department, who has been meeting with airline executives across the country, said they have “no anxiety at all” about the $1.9 billion price tag on the new terminal.

But that wasn’t true. The airlines did have problems with the $1.9 billion price tag, and are asking to have their own consultants look at the price.

Fox 4 reported on November 15 that Mayor James said the price problem was specific to a dispute about paying for the new baggage handling system. But that wasn’t true, either. While there is a dispute regarding baggage fees, Steve Vockrodt reported on December 2 in the Star that, yes, the price itself was a point of contention.

Part of the reason why airline buy-in is so important is that Kansas Citians have been told all along that the airlines would be footing the bill without taxpayer funds. But this might not end up being the case—finance department representatives said they might use the general fund to cover initial costs. Now the city council is acting to make sure that those previous promises are honored.

Regardless of whether officials are misleading the public or simply do not know what they are doing, the airport project appears to be a mess. But civic leadership is willing to look the other way. Good public policy is unlikely to result from such an awful process.

The post What Is Going On with the KCI Project? appeared first on Show-Me Institute.

The argument about ticket prices is so misleading that it could seem to be intentionally so. Consider this: Airlines pay rent to airports that is measured in terms of cost per enplanement (CPE)—in other words, per person boarding the plane. In 2016, Lynn Horsley wrote in The Kansas City Star,

In 2015, based on an industry measurement, the cost of operating KCI was $6.70 per enplaned (departing) passenger. With a $970 million improvement project, which is the estimated cost of a new terminal, that cost per passenger boarding would bump up to about $9.00 in 2015 dollars.

Since that story, the cost of the new terminal has more than doubled that $970 figure. Will the new CPE really be $18 or over? This chart of the top 50 airports ranked by CPE suggests that an $18 CPE would make Kansas City International the 7th most expensive airport in the country. This is the higher cost that Allegiant and Spirit Airlines say they cannot bear. According to the Star:

Matt Klein, senior vice president and chief commercial officer for Spirit, said in his letter that Kansas City’s aging airport should be updated and is “not befitting of a major U.S. city.”

“However, we believe the current investment proposal is simply … too costly for smaller new entrant carriers to bear and still deliver the value that we deliver to the community in terms of low airfares,” Klein said.

Allegiant’s vice president of airports and government affairs, Keith Hansen, wrote to reiterate the airline’s support for the project, but said larger airlines were expecting smaller airlines to shoulder an unreasonably large portion of the costs of operating the airport.

“Given that the terms for the new airport rates and charges agreement remain unknown and considering the larger carriers continue to reject equitable cost allocation, Allegiant cannot support the terminal development program at this time,” Hansen said.

So . . . if KCI is too expensive for these low-cost airlines, they may just stop serving Kansas City altogether. Less competition at KCI will mean higher fares, higher parking fees, and so on to cover the monstrous amount of debt that a $2 billion airport terminal requires. And if it is too expensive for the remaining airlines, they may also stop serving KCI. Who makes the bond payments then?

Taking on such a large amount of debt to build a new single-terminal airport includes a significant amount of risk—not just for the airlines and bond holders, but for the airport and the city itself. Giving taxpayers the impression that all of this is free is irresponsible and suggests a lack of candor from policymakers.

The post KCI Airlines Links New Terminal Costs with . . . Service appeared first on Show-Me Institute.

In fairness, my colleague Joe Miller recently wrote that there are some reasons why a city might rightfully consider building a new terminal. The cost of current maintenance may be more expensive than a modern replacement, or a new terminal may be needed to accommodate increased traffic. Neither of those apply to MCI. While our traffic is up moderately, no one is arguing that we need to build for increased capacity. In fact, the new terminal proposal from the Aviation Department would reduce the number of gates we have now.

No one is arguing that the costs of maintaining the current MCI are prohibitive, either. Supporters of a new terminal seem to have strictly cosmetic concerns.

As for doing what we want airports to do, MCI is serving admirably. Consider the recent developments.

• In 2014, MCI picked up service from Spirit Airlines, and Seaport Airlines added service. Southwest announced that service to Ronald Reagan National Airport in Washington, D.C. has been approved.
• In 2015, Spirit started offering direct nonstop flights to Los Angeles. Allegiant Airlines will be flying nonstop to Florida from MCI, and Southwest offers new direct service New York LaGuardia, and Orange County, California. American Airlines added nonstop flights from Kansas City to Miami.
• And in 2016, Frontier Airlines will add flights to Atlanta, Chicago, and Philadelphia. Southwest recently expanded service in the form of direct flights to San Antonio.

In January, the Star catalogued some of MCI’s gains, including that annual traffic has grown each year since 2012 with the terminal we have now. Supporters of a rebuild point to possible (but by no means certain) increases in traffic as a result of a new terminal. But as Miller concluded in 2014:

To sum it up, the airlines (and common sense) say that building an expensive new terminal will not increase demand for air travel. Quite the contrary, the higher costs to airlines and passengers may mean fewer flights. Even if we agree with business leaders that MCI requires more amenities, certainly there is a cheaper way of providing these than a $1.2 billion new terminal plan. The cost is so much greater than the supposed benefits that the plan looks more like a vanity project than a sound investment.

In short, Kansas City’s airport is doing well. It has won high marks for its convenience; we’re unlikely to suffer the long waits seen at other airports because MCI does not use the TSA for security. Importantly, airlines seem eager to come and expand their service (despite their claims to the contrary). It is unlikely that Kansas City could improve on this. In fact, in taking on mountains of debt we risk losing the competitive advantage that many of us now take for granted. 

The post MCI Is the Envy of its Peers appeared first on Show-Me Institute.

Supporters of a new terminal lamented this pause and argued that voters were not sufficiently informed of what was before them. Some even propose a more aggressive public education campaign. Sadly, this is what serious policy discussions often come down to—not thoughtful exchanges of ideas, but rather an uncompromising proposal stubbornly marketed and shouted in various ways at a busy public. And if they still don’t agree . . . shout louder!

In fact, after years of public debate, voters in Kansas City (and everyone who uses the airport) knew exactly what was being asked of them. Few issues have been discussed in more or at greater length than the airport. There have been numerous public meetings, TV and radio segments, and print news articles on the matter. A group of citizens even collected signatures to make sure the public had a vote. The public knew exactly what was being proposed.

Because MCI is a cheap airport for airlines to serve, we get more service. We have more direct flights than other markets our size. American Airlines and Southwest continue to expand service and in recent years we’ve attracted additional smaller discount airlines such as Allegiant and Spirit. These are not warning signs of a failing airport.

There are risks to taking on big builds. In Sacramento, San Jose, and Cincinnati, localities invested heavily in new airports. They increased airline fees to pay down the debt and saw airline service decline. This is a simple enough economic reality: when you charge more for something, you sell less of it. It really is that simple. Any effort to improve MCI must make sure that we retain our competitive advantage: a cheap and convenient airport.

Those in St. Joseph and across the region have a stake in the matter, but they won’t have a vote. Frequent travelers would be well served to make sure their friends in Kansas City are educated on the benefits and risks of a new terminal.

The post An Informed Public: Poor Policy’s Worst Enemy appeared first on Show-Me Institute.

But looks can be deceiving. For one thing, passenger growth at the airport (1%) lagged behind the national average (4%). This mirrors Saint Louis’s overall economic performance in the last year, which, while improving, is growing at a slower rate than much of the rest of the country. Look back further than last year and the situation is worse. STL’s traffic is still 12% lower than it was just before the recession. In fact, there were fewer passengers and flights from STL in 2015 than there were in 2010, after the recession had ended.

The only category where the airport is has had success is in adding non-stop destinations, which increased from 55 to 60 in the last five years. But even here, improvement isn't necessarily as impressive as it first appears. Most of the added destinations are seasonal options, bound for resort destinations in the Caribbean. STL flies to fewer national, year-round destinations than it did five years ago.

Why is STL having such a difficult attracting more flights and more passengers? The culprit may be a slow Saint Louis economy, which airport managers have little control over. However, the airport is still dealing with a hangover from the new (and ultimately unneeded) runway it built in the early 2000s. That has made the airport more expensive, and therefore less attractive for additional airline service. For example, low-cost airline Allegiant recently chose to use Mid-America Regional Airport for new flights to Florida.

While it’s easy to blame things outside the airport’s control, STL’s leadership can make the best of a difficult situation. That means resisting the impulse, so prevalent in civic affairs, to try spending their way to health with lavish improvement projects. Providing efficient and plentiful air service is better than less service and more luggage shops. Bringing in more freight traffic may allow the airport to use extra room it thought it would need for the TWA hub. If STL leadership can implement a cost-effective, customer-oriented strategy, it will help not just the airport, but the entire Saint Louis region.

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Allegiant’s business model  is to provide the cheapest possible flights for travelers going from Northern climates to warmer destinations in the South and on the West Coast. To maintain cost-competitiveness, the airline charges a low base price and then adds extra charges for various amenities passengers can decide to buy. This makes Allegiant typical of Ultra Low Cost Carriers.

But the attention to costs does not stop there. Allegiant often eschews larger airports for smaller, secondary airports in metropolitan areas. For instance, instead of flying out of Saint Louis International Airport, Allegiant flies out of Belleville, a little-used airport some miles distant. These secondary airports have lower costs than large hubs, and Allegiant can use that advantage to stay cheaper than the competition. Aside from its primary holiday destinations, Allegiant avoids the nation’s largest airports. As the map above shows, it even avoids busy medium-hub airports where possible.

How then did MCI, a busy, medium-hub airport, entice Allegiant? Part of the answer is likely low price: whereas most medium-hub airports cost an airline more than $10 per passenger, at MCI the cost is only $7.75 per passenger. Not only is that much cheaper than most airports of its size, it’s cheaper than most small- and non-hub airports, as the chart below shows:

The low price makes it more affordable for Allegiant to take a chance serving MCI. In fact, holiday destinations aside, MCI is the busiest airport that Allegiant serves.

The addition of Allegiant to MCI underscores the reality that at airports, like everywhere else, costs matter. While expensive improvement projects may excite local leadership or spruce up the city’s front door, higher costs make an airport less competitive in its main mission: providing airline service. Residents and city leaders should remember that as they plan terminal improvements at MCI. 

The post Allegiant Shows How Kansas City’s Airport Benefits from Low Costs appeared first on Show-Me Institute.

On Tuesday, Allegiant Air announced it will start nonstop service from Kansas City to Orlando, Southwest Florida and Tampa in mid-November. The Las Vegas–based low-cost airline is operated by Allegiant Travel Co.

In an interview on KMBZ radio, Bill Grady asked airport administrator Mark VanLoh if this new service announcement raised questions about the real need for a new terminal. Mr. VanLoh replied, “I don’t see how the two are connected.”  

In fact, the two are very much connected.

The news of Allegiant Air is not only good news in and of itself, but it demonstrates exactly why Kansas Citians ought to be skeptical of taking on an unnecessarily large expense at the airport. Allegiant Air is a “low-cost” airline. According the The Memphis Business Journal: 

Allegiant often serves smaller markets like Orlando-Sanford International Airport instead of Orlando International Airport to avoid pricey landing fees.

Advocates of spending a great deal of money at the airport tell us that only travelers and airlines will pay the price. That is largely true. They also tell us that the prices airlines pay to serve an airport have little to do with ticket price; that may also be true. But pricey landing fees of the type that would follow an expensive rebuild or remodel may chase away airlines like Allegiant. And they would be a disincentive for bigger airlines like Southwest, too. A Southwest vice president said as much to the airport advisory group, “Higher costs can lead to less service, not more.” They have left other airports over similar price increases.

If Southwest wants to pour hundreds of millions of dollars into a new KCI, that might be welcome. But if improvements require issuing bonds resulting in higher fees to airlines, city leaders should think twice. A shiny new airport is of no use if airlines choose not to service it.

The post How a Cheap Airport Helps Kansas City appeared first on Show-Me Institute.