Could the airport just be a legacy project? Two years ago, then–Aviation Department Director Mark VanLoh made it seem that way when he told the Northland Regional Chamber of Commerce, “You don’t have [all the information] yet. We don’t even have it yet. I know what I want because I want a new airport.” He just wanted it.

VanLoh is gone, but the strange enthusiasm for a single terminal continues. The new plan is just as over-the-top as the old one. The justifications for the spending come and go—claims of EPA mandates, TSA concerns, and airlines’ refusal to expand services—but the project itself remains the same: a $1.2-billion single terminal that is actually a downsizing of what we have now.

What is new in this round of the discussion is the financing and no-bid contracting. But regardless of who finances and builds the airport, the risk to Kansas City comes from the possibility of increased fees to airlines and passengers. Right now, Kansas City’s airport is very cheap for airlines, and travelers benefit with lots of flights from here. Increase the costs to airlines, and we risk losing that competitive advantage. Other airports have suffered after building new terminals for just that reason (Consider Cincinnati, Sacramento, or San Jose.).

The good news is that the city is no longer claiming that the airlines agreed to finance the project. This was never the case, despite incorrect claims from the Kansas City Star and the Kansas City Business Journal. In truth, the airlines merely agreed to pay higher rent for a new terminal while reserving their right to renegotiate once the terminal is built. They did not issue or back any debt; they accepted no risk.

Proponents of a new terminal are fond of telling us that the new terminal idea is not a Taj Mahal. In fact, they’ve been using that curious term over and over again for years (see the Google search here). The Taj Mahal, of course, is a 400-year-old elaborate mausoleum in India built to house an emperor’s wife. Such determination to settle for nothing less than a new terminal, however, combined with the candor of Mark VanLoh and the out-of-hand dismissal of cheaper alternatives, suggests that this is exactly what the new terminal is: a modern monument to political ego—not what is best for Kansas City.

The post Kansas City’s Airport: A Monument to Political Ego appeared first on Show-Me Institute.

Here are five good reasons to reject ATAG’s call for the creation of a new terminal at KCI:

No. 1: It is hugely expensive compared with the alternatives.

The Kansas City Aviation Department has stated that repairs could cost as little as $241 million if only two of the three terminals are repaired ($360 million for all three). That being the case, KCI could perform two major repairs over the next 30 years instead of building a $1.2 billion new terminal and still save hundreds of millions of dollars. The necessary service amenities such as Wi-Fi or electrical outlets can be added at a significantly lower cost and do not justify a new terminal.

No. 2: A new terminal will not bring new flights to KCI.

During ATAG meetings, the airlines and aviation consultants stated that the number of flights a city receives is mostly based on underlying economic factors, not the quality of the airport terminal. Paraphrasing a Southwest Airlines representative, if airport terminals determined air service, no one would ever fly from LaGuardia Airport. Promises of increased business travel or businesses choosing Kansas City based on airport terminals have never been more than anecdotes.

No. 3: The airlines are not happy with the plan.

The Kansas City Aviation Department claims the airlines were consulted, but representatives for the airlines disagree. Last year, Southwest representatives openly complained that the Aviation Department had not consulted with them. At a later ATAG meeting, they warned that the new terminal plan was too expensive and might result in reduced service. Only now, months after debate about the new terminal plan began, have the airlines truly been brought into the decision-making process through a new airport-airline contract signed last month.

No. 4: It will lead to less flights and higher costs to Kansas City residents.

The supporters of the new terminal plan presume that airlines and passengers at other airports will bear the entire cost of building a new terminal, with no consequences for KCI. However, if nothing else, KCI users will immediately pay higher parking fees, part of the new terminal plan. In addition, the idea that costs do not matter for airport service goes against both the warnings of airlines and the experiences of other airports such as Sacramento International Airport and Lambert-St. Louis International Airport. A more expensive KCI could certainly see less airline service – in leading to higher landing fees, reduced service, and steeper airfares.

No. 5: Who wants it anyway?

Whether it is the plentiful parking or the short security lines, residents are concerned that the terminals they like are being replaced so they can be corralled into a shopping mall. Groups like Save KCI and others have made their voices heard at both ATAG meetings and through city legislation preventing the demolition of the existing terminals without a public vote.

The new terminal plan proposes to make KCI an expensive, high-debt airport. The plan, if implemented, will risk KCI’s competitiveness without attracting new passengers. The plan was created without the approval of critical stakeholders, the airlines, and without proving that the plan was either necessary or cost-effective. ATAG might not have done its job to ground this irresponsible plan, but residents, who will get to vote on the matter, certainly should.

Joseph Miller is a policy researcher at the Show-Me Institute, which promotes market solutions for Missouri public policy.

The post Five Good Reasons To Reject New KCI Terminal appeared first on Show-Me Institute.

First, the consultant criticized the airlines’ statement that the airline industry has experienced considerable stress since 2001 and would attempt to use their limited resources where they make the most profit. The consultant claimed that, “In fact, the airlines are now experiencing record profits.” This point is shortsighted. Airlines have managed profitability in the last couple of years. However, in the last two decades, the airlines lost so much money that Warren Buffett joked, “If a capitalist had been present at Kitty Hawk back in the early 1900s, he should have shot Orville Wright.” The airlines only reached this profitability after massive consolidation, keeping just the most profitable flights, and closing airport hubs. Airlines, especially MCI’s largest carrier, Southwest, have learned their lesson and will likely remain cost-conscious in the future.

Second, the consultant objected to the airlines’ view that terminals do not create demand. They stated:

…a new or expanded terminal can address certain deficiencies and open up new air service opportunities…For example, the lack of international gate capacity…

This point is strange, as the consultant admits that growth in international travel at MCI is essentially flat (0.7 percent growth) and will remain so. But, according to the consultant, Kansas City can be like Pittsburgh, which has a flight to Paris. Unfortunately, Pittsburgh had to pay $9 million in subsidies for that honor, so maybe Kansas City does not want be like Pittsburgh. As Southwest officials stated, MCI has adequate capacity and its price competitiveness means more service. Compared to non-hub peer airports, MCI has more non-stop destinations.

Third, consultants disagreed with the airlines about the importance of landing costs for airlines. They stated:

In general, airport costs (i.e., terminal rents and landing fees) comprise roughly 3 to 6 percent of an airline’s total costs.

The consultants claim that fuel is most important to airlines and operation costs can decrease at a more efficient, new site. However, this is irrelevant. If a new terminal is built that makes MCI more expensive to operate out of, the airport could certainly lose flights. Perhaps the consultants at Frasca & Associates should call Southwest officials and tell them that 3-6 percent of their costs don’t matter and they should not have refused to sign a lease agreement with Sacramento International Airport after that airport’s costs increased.

The consultants make several other points that are equally not insightful. Perhaps it need only be pointed out that airlines understand the aviation industry. The airlines also decide where their airplanes actually go, making their viewpoint on why they choose specific airports especially important.

The post On The Airline Industry, Don’t Trust The Airlines, Just Listen To A Consultant appeared first on Show-Me Institute.

As the article rightly points out, the aviation director initially supported an even more expensive South Terminal Plan. That approach lost favor with KCAD because the Missouri Department of Transportation (MoDOT) would not build the required highway alterations. When selecting a new design, KCAD gave the public three options: the South Terminal Plan (which it already knew it could not do), the current design, and a mirrored option of the current design. So much for alternatives. Even today, after months of Airport Advisory Group meetings, the Aviation Department has yet to create serious renovation alternatives to its desired plan.

The Star article does not point out how the department has repeatedly contradicted itself about cost estimates and construction timelines. First, the airport was going to cost a minimum of $1.2 billion, then it was $900 million, or $965 million. MCI repair costs are shown as less than $200 million in a bond report, but then KCAD claimed the amount is $600 million or even $700 million. The new terminal planning documents call for the new terminal to open by 2019, but the aviation director then claimed that construction will not happen until 2020. At what point should the public conclude that the Aviation Department will say whatever number they think will get a new terminal?

Although the Star article downplays it, the opposition of the airlines has done the most damage to KCAD’s credibility. Before their testimony, the Aviation Department said that critics were wrong: wrong that the debt could harm the airport financially, wrong about how much money a new terminal could generate, wrong that the airport could continue in its current form, even wrong about the convenience of MCI. However, since Southwest representatives essentially vindicated the critics and warned against the risks of the new terminal plan, KCAD’s position has become untenable.

Most residents know that the airlines understand the aviation industry and that if they do not support the new terminal, it is probably a bad idea. What most residents probably do not know is that the ability of MCI to finance the $1.2 billion terminal plan depends on the airlines signing a new contract that makes them responsible for paying the terminal’s immense debt. If the terminal is built and the airlines refuse to sign, then MCI will be in Sacramento International Airport’s current position, scrambling to cut costs and find new revenue sources as its debt payments mount. It seems impossible that KCAD devised a new terminal plan and took that plan public without ensuring that its tenets/source of financing actually wanted it. Yet that is what happened.

It is good to see the Star arguing for change in KCAD’s performance and a new plan for MCI. Whether or not the aviation director is replaced, Kansas City would be well served by an open discussion about the future of Kansas City International Airport.

The post Kansas City Star Calls For New MCI Plan, Airport Leadership appeared first on Show-Me Institute.

The Show-Me Institute has written about the new terminal plan numerous times. We have questioned the need for a new terminal and the lack of reasonable alternatives to the Aviation Department’s plan. We have expressed concern about the cost of a new terminal and the impact of those costs on the airport’s financial viability and competitiveness. We pointed out that many residents like the current layout, ranking No. 1 in overall airport satisfaction in a J.D. Power & Associates survey. In response, we hear that cost per enplaned passenger does not matter, that the current terminal is falling apart, and we are simply standing in the way of a modern MCI.

But as yesterday’s Terminal Advisory Group meeting confirmed, Southwest and the other airlines that serve MCI agree with our position, and yes, costs matter in the air travel business. Their points were:

• The current system meets the airlines’ needs now and for the next 10 years. If customers need more, the airlines can pay for that in the future.
• Airlines have mobile assets and are risk adverse. They will go where they can make the most money.
• The new terminal plan will increase costs and that “higher cost can lead to less service, not more…”
• “The terminals do not generate or impact demand” for flights.
• The example of the billion dollar new terminal at Sacramento International Airport (as the Show-Me Institute publicized), and its subsequent financial and competitiveness issues, are a cautionary tale for MCI.

Essentially, the airline representatives all but said that the $1.2 billion new terminal plan is harmful and unnecessary. Apologists for the new plan are already going for damage control, stating that the airlines are just one voice among many. One Advisory Group member went as far as saying that there is tension between the airlines looking for low costs and the city looking to provide the best experience for is customers.

But the airlines are not just a voice, they are the airport’s tenants and main source of revenue. In addition, as market-driven entities, the airlines’ incentives are more in line with airline customers than city officials. Above all, travelers want cheap, convenient flights, not a shopping mall. If city officials are prudent, they will heed the warnings of the airlines and ground the new terminal plan.

The post Airlines Wary Of New Airport Terminal In Kansas City appeared first on Show-Me Institute.

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.

Not yet.

The post The Ghost Of Airport Terminals Yet To Come appeared first on Show-Me Institute.