Houston, Continental Plan Massive Terminal Expansion at Bush Airport

DALLAS - Houston and Continental Airlines plan a nearly fivefold expansion of Terminal B of George Bush Intercontinental Airport that will take nearly a decade and cost roughly $1.2 billion.

The terminal will house a new Federal Inspections Services facility to handle the increasing number of international travelers, according to the Houston Airport System. Continental and its Continental Express account for roughly 86% of passengers at Bush, which is about 20 miles north of downtown.

Juan M. Alanis, media relations supervisor for the airport system, said the exact amount of funding from Houston hasn't been finalized by the City Council.

"But the split right now is roughly 60%-40% ... $458.8 million plus for the city of Houston, $674.5 million for Continental Airlines," he said.

The city would fund its share primarily through the issuance of airport system revenue bonds and a passenger facility charge at Bush of $3 per trip, according to Alanis.

Bush serves as the largest of Continental's four global hubs and the airline is an original tenant of Terminal B, which opened in 1969. Alanis said the airport served roughly 4.5 million travelers that year and nearly 44 million last year, adding, "Passenger growth is increasing and more gates and better facilities are needed at Terminal B to accommodate this growth."

"Based on the strength of our projections for passenger growth, both national and international and in line with the Houston Airport System master plan, we believe the time is ripe for this infrastructure development," said Marlene McClinton, spokeswoman for the system.

Last week, British Airways began nonstop flights from Bush to London's Heathrow Airport. Earlier this year, Emirates Airlines started flying between Houston and Dubai and Singapore Airlines launchedflights to Singapore via Moscow from the airport, marking the first nonstop trips to Russia from Houston.

The expansion of Terminal B to increase the number of international flights is something both the airline and the airport have sought for years. Construction on the expansion that will take Terminal B to 1.7 million square feet from 360,000 square feet is slated to begin later this year and expected to take seven to 10 years to complete.

"We're making this investment over the next decade despite challenges currently facing the airline industry," Continental Airlines chairman and chief executiveofficer Larry Kellner said in a news release. "This project is critical to Houston maintaining its status as an international city. Developed in phases, this project will allow us to accommodate more passengers and more flights, provide new amenities for travelers and help secure the careers of our employees."

A few years ago, Dallas-Fort Worth International Airport opened a new two-million-square-feet Terminal D to handle increases in international flights.

First Southwest Co. and Estrada Hinojosa & Co. are co-financial advisers to Houston Airport System, which operates Bush, William P. Hobby Airport, and Ellington Field.

Vinson & Elkins LLP and Bates & Coleman PC are co-bond counsel.

The airport system carries underlying ratings of A-plus from both Fitch Ratings and Standard & Poor's, and A1 from Moody's Investors Service.

Standard & Poor's said the rating reflects the system's "dominant market position in a large, growing, and diversifying service area," gains in enplanements that continue to rise to record levels each year, a solid financial position, and an experienced management team with "strict oversight by the system's operations and capital plans."

Analysts said offsetting factors include a high-airline concentration, with Continental accounting for most of the passengers at Bush and Southwest Airlines accounting for most of the Hobby enplanements, and a significant increase in debt and the subsequent higher debt service.

 

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