D/FW Airport’s $2 billion terminal project will increase fees for parking, airlines, concessions

D/FW Airport’s $2 billion terminal project will increase fees for parking, airlines, concessions

09:55 AM CDT on Friday, June 25, 2010

By ERIC TORBENSON / The Dallas Morning News
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Renovation of the four older terminals at Dallas/Fort Worth International Airport will probably mean higher parking rates for travelers and higher costs for airlines.
G.J. McCARTHY/DMN File

G.J. McCARTHY/DMN File
D/FW Airport’s Terminal A is one of four terminals slated for renovations in a $2 billion project, which likely will result in higher parking rates for travelers and higher operating costs for airlines.

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It could also mean a slew of new nonstop flights to overseas destinations, as the airport sells itself abroad more aggressively, and fresh new concessions, as it polishes its restaurants and stores.
That was the picture painted by airport officials Thursday as they outlined their financial plan to the airport board at its annual retreat.
The airport, which creates as many as 300,000 local jobs, plans to spend $2 billion to update the 36-year-old buildings. Paying off the future debt load will require concession and parking revenue to double in the next 10 to 15 years, airport staff said.
D/FW’s push to drive up parking revenue will probably mean more skirmishes between it and its off-airport parking competitors as they battle for fliers’ wallets.
To find more money, the airport is targeting three areas: parking, terminal concessions and commercial development. Today the three add up to just under $200 million. In 20 years, that total may be just under $500 million, if the airport’s bold steps pan out.

Parking rates among lowest

The airport staff plans a small parking fee increase – $1 or $2 for each of the airport’s parking lots – in next year’s budget. D/FW’s parking rates trail its peers’; its top rate of $17 a day for parking close to its terminals is less than half what big airports such as Chicago’s O’Hare International charge.

As for higher rates, “I think the public understands that,” said Fort Worth Mayor Mike Moncrief, a board member. “As long as it’s a gradual process.”
Financing improvements to the aging terminals will increase the airport’s costs dramatically. Debt service costs will go from under $100 million a year to more than $233 million by 2020.
That will push up the landing fees, rentals and other charges that tenants such as Fort Worth-based American Airlines Inc. pay. Airport chief executive Jeff Fegan said American, which flies 85 percent of the traffic at D/FW, has tentatively signed off on the structure of a new 10-year lease.

American didn’t return a request for comment. The new lease with American and other airlines is designed to give the airport more control of its finances than it has today. The changes propose shifting some airport-generated revenue directly to the airport’s own coffers instead of using all of it to help offset airline costs. The lease changes and terminal redevelopment plan will push D/FW’s cost per passenger up from its current $7 – among the lowest for a big hub airport – to more than $12 per passenger.
D/FW’s staff hopes that other airports’ costs will rise in coming years, keeping D/FW’s price edge intact. That is a crucial selling point to getting airlines to add flights – and more flights mean more passengers to eat, shop and park.
The money spent to bring brighter, bigger concession spaces in Terminals A, B, C and E should pay off in higher food and beverage sales. But it is parking revenue – now just under $100 million a year – and rental income from commercial development that could yield the biggest gains.

D/FW gets only about 17 percent of the local passengers who have the choice to park. Sixty percent are choosing to be dropped off and picked up at the airport – not so much because of price concerns, said Ken Buchanan, D/FW’s executive vice president for revenue management, but because of convenience, availability and even safety concerns.
Attracting those customers is key to increasing parking revenue. “That’s where the fish are,” he told the board.
Each of the four terminals that will be rebuilt through 2017 will get a new, larger parking garage. D/FW will also rebuild its South Express parking lot with more covered spaces and expand its least-expensive Remote lots.
The airport also expects to have a better parking management system that will allow it to sell to customers at different prices. For example, fliers staying longer might get a cheaper daily rate to encourage them to park at the airport instead of elsewhere.

Doubling share

Parking revenue could approach $170 million a year by 2020 and $250 million by 2030. The airport expects to easily double its share of local parkers to the point where it may actually lower daily rates, Buchanan said. “I think the board believes we should pursue that business,” Buchanan said.
Off-airport market share is expected to fall from its current 21 percent as time goes on and the airport becomes more aggressive about keeping parking revenue.
Commercial development income could jump from just over $20 million this year to as much as $160 million annually by 2030, staff projects. Moncrief said he’s a bit cautious that D/FW’s efforts to attract businesses and development could come at the expense of owner-cities Dallas and Fort Worth.

Another part of finding more revenue to cover airport costs is air service development. Joe Lopano said he’s encouraged by talks with low-fare airline JetBlue Airways Corp. about possible service to New York’s JFK International Airport and to Boston. Lopano, the executive vice president of marketing, added that there’s encouraging progress to get air service to the United Arab Emirates.
“The world is breaking down into ‘superhubs,’ and D/FW is among them,” said Lopano, who is confident the airport will get new air service to China, Australia, the Middle East and to more cities in Europe, such as Barcelona, Spain, and Munich, “within three to five years.” Those flights would bring more passengers to spend money at the airport, help balance its finances and keep it competitive with other hubs.

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