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New Orleans Airport Upgrades With New Terminal

DALLAS – Airline operations at New Orleans Louis Armstrong International Airport would move to a more compact and efficient passenger terminal in a plan that cleared a major hurdle this month.

The new terminal would be built across the runways from the existing passenger facility.

It’s the latest proposal in more than three decades of planning for the future of Louisiana’s largest and busiest airport.  The $826 million capital improvement plan to move passenger operations to a new, three-concourse terminal on the north side of the airport was adopted April 17 by the New Orleans Aviation Board.

The project includes a $650 million, 30-gate terminal financed in part with proceeds from $267.5 million of general airport revenue bonds and $207.3 million of debt supported by revenues from the airport’s passenger facility fee.

The New Orleans Aviation Board will seek authorization for the debt from the State Bond Commission when final project cost has been determined.

Work on the terminal project is expected to begin in 2014 with completion in time for the city’s 300th anniversary in 2018.

New Orleans Aviation Board’s $128 million of outstanding general airport revenue bonds and $135 million of passenger facility charge-supported bonds are rated A3 by Moody’s Investors Service and A-minus by Fitch Ratings. Its passenger facility charge bonds, which are supported by the airport’s $4.50 per passenger fee, are rated A-minus by Standard & Poor’s.

Airport revenue is approximately $107 million a year, with another $20 million coming in annual from the facility charge on airline passengers.

Other components of the program include an $87 million connection with Interstate 10, a $72 million central power plant financed with state capital outlay funds, and $17 million of private financing for an airport hotel.

In addition to the bond proceeds, projected financing includes $97 million of federal airport grants, $26 million from the Transportation Security Administration, $27 million of state airport funding, and $30 million of airport self-generated funds.

Mayor Mitch Landrieu said he favored the move north when he asked the Aviation Board in 2011 to undertake an in-depth analysis of an airport modernization effort.

Placement of the new terminal on 42 acres of vacant land on the other side of the main east-west runway from the current facility was one of the four options presented to the Aviation Board by a consortium of five consultants developed the master plan over the last 20 months.

The consultant group outlined four proposals, with the north side plan receiving the highest marks.

“It became very apparent to us, as we went through this process, that the best way to go is with the north option,” said airport trustee Roger Ogden. “Now is the time for New Orleans to seize the day and take action.”

Landrieu praised the board’s decision last week.

“Recently, significant progress has been made to improve the air service, facilities, and customer experience at Armstrong International,” he said. “But this option provides us the ability to build on these improvements and create the world-class airport that this city deserves. 

“We cannot afford to let another 30 years go by without a clear path forward,” he said. “The north side option is financially feasible and delivers a strong return on investment for our region.”

A series of studies that commenced in 1974 identified 11 potential sites for re-locating the airport. The first master plan for airport improvements and expansion was adopted in 1980, but its recommendations, including a new runway, were never implemented.

The new terminal will be a welcoming gateway to New Orleans for millions of tourists and business travelers each year, Landrieu said, and the modernized airport will continue as an important economic development engine for the entire region.

“Creating a new, modern airport is integral to our success as a world-class travel destination and hub for commerce,” he said. “It makes economic sense and will create over 13,000 jobs in construction.”

The airport is owned by New Orleans, but is located in Kenner, in Jefferson Parish about 10 miles west of downtown New Orleans. A small portion of one runway extends into St. Charles Parish.

Kenner Mayor Mike Yenni said the airport modernization will dovetail with the city’s plan to use proceeds from sales tax bonds to upgrade and beautify 10 road corridors, including several serving the airport. Kenner City Council authorized the bonds last week after receiving preliminary approval from the State Bond Commission on April 18.

“We couldn’t be more excited in Kenner for a new and improved airport to hopefully go along with $29 million in beautification improvements,” Yenni said.

“In some cities, the airport is an hour-long drive or longer, which can be a real inconvenience,” Yenni said. “But if you live or work in Kenner, you’ll have the newest airport in the country just a few minutes away.”

Passenger traffic peaked at almost 10 million in 2004 and fell to a low of 6.2 million in 2006 after Hurricane Katrina hit in 2005, rising to 8.6 million in 2012.

The airport, which is 4 feet above sea level, suffered some $55 million in damage from winds that peeled off several roof sections. It opened to military and humanitarian flights two days after the hurricane, and the terminal housed injured residents and patients evacuated from storm-damaged hospitals and nursing homes.

A $300 million terminal upgrade program was completed in January 2012 in time for the influx of traffic from the Super Bowl in February, but airport officials said those improvements were not sufficient to keep the terminal viable on a long-term basis.

The four concourses at the existing, aging terminal are widely separated, said Aviation Director Iftikhar Ahmad, and passengers on connecting flights often must go through another security screening.

The New Orleans airport opened as Moisant Field in 1946 after serving as a military air field in World War II. The current terminal was completed in 1959, and two concourses were added in 1974.

The high overhead costs and limited revenue potential of the 54-year-old terminal increase the financial burden on airline tenants, Ahmad said, and make it difficult for the airlines serving New Orleans to be competitive.

The terminal’s utility systems are obsolete and inefficient, and only 22 of the 42 gates are used. High operational costs have pushed the airport’s per-passenger enplanement cost to $8.49, compared to the average U.S. airport charge of $7 per passenger, according to the airport. However, New Orleans’ costs have declined from a peak of $10.90 in 2010, when the airport restructured the concession contracts to generate more revenue.

The current terminal layout limits revenue from parking and concessions, which are outside the secure zone where travelers spend most of their time waiting for flights. The new terminal will resolve those revenue limitations with a more agreeable layout and a 3,000-space parking garage.

The new 30-gate facility will be half the size of the existing 1.2 million square foot terminal, and can be expanded to a total of 60 gates. An in-line automated screening system will be more secure and capable of handling large numbers of departing passengers, which often overwhelm the current manual baggage handling facility.

The recent upgrades at the current terminal will provide benefits for the next five years until the replacement facility is ready, Ahmad said. The old structure will remain useful even after passenger operations move out.

“One of the exciting things about choosing the north side alternative is that we have an economic development opportunity to convert the existing terminal into general aviation, cargo, multimodal, and other commercial use,” said Ahmad.

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