CHICAGO - Plans for major terminal overhauls are afoot for airports in Kansas City and Des Moines, where officials are promoting the need to modernize to meet aviation demand.
In Kansas City, Mo., an advisory board is examining options that include consolidating the 42-year-old, city-owned Kansas City International Airport's three terminals into a single $1.2 billion facility.
The panel, appointed by Mayor Sly James in May, is holding public hearings and is expected to issue its recommendations in a report to the mayor and council next month.
The group is weighing a series of options that also include renovating the existing terminals to suit the airport's needs over the next decade at a price of $365 million to $460 million. Frasca & Associates LLC is acting as consultant to the panel.
Other alternatives involve expanding the existing terminals with upgrades to parking, nearby roads, and screening areas, or a new central terminal to house security and passenger processing.
The fourth option centers on a new single terminal with a price tag of between $800 million and $1.2 billion. Landrum & Brown Inc. designed the single terminal proposal last spring as part of a federally funded feasibility study. Debate over the airport's future led to the appointment of the panel.
"Going forward, the three terminals at KCI do not make sense financially or environmentally and cannot accommodate needed modernization for passenger convenience, airline expansion, baggage and security requirements," said a city fact sheet released last year on the one-terminal design.
The focus on terminal overhauls in Kansas City and Des Moines reflect a national trend as airlines' use of larger aircraft has eased runway capacity constraints allowing airports to focus on improving customers' experience in the terminal, according to Earl Heffintrayer, airport analyst at Moody's Investors Service.
"There are pockets around the U.S. where you are seeing this," he said.
In Kansas City, proponents of the single terminal believe it offers the best option for making the airport more attractive to airlines and connecting travelers while meeting environmental standards for capturing de-icing fluids and federal safety rules.
The airport decision in Kansas City could be contentious because the current three-terminal arrangement, geared toward reducing travel time between parking and airplane gates, is popular with local travelers beginning and ending trips in Kansas City.
The airport opened in 1972, when passengers did not have to clear security to board flights. For passengers on connecting flights today, the terminal layout complicates their travels and can require another trip through the security line.
While detractors of a new terminal cite inconvenience and cost, supporters believe it will improve efficiency by saving money on operations and centralizing security.
A city fact sheet on the one-terminal proposal said the facility would be paid for through a combination of federal grants, passenger facility charges and revenue bonds, and private financing could also be considered.
The city council recently unanimously approved a new two-year lease that calls for a collaborative effort between the city aviation department and the airport's eight airlines on terminal decisions.
The council also approved the measure to require voter approval for any plan that calls for the demolition and reconstruction of terminals at city-owned airports and ban the city's use of public resources to influence the ballot outcome.
The resolution allows the city to avoid two ballot measures, one that would have been forced by a petition effort on the actual plan, and another on any debt issuance. The group seeking a public vote said the resolution accomplishes its goal without a court battle.
The city last year refunded about $200 million of airport debt in a deal that streamlined its debt portfolio in a new master bond ordinance to achieve savings and smooth the path for future issuance.
Standard & Poor's assigned an A-plus rating to the refunding bonds and affirmed the A-plus rating on existing senior lien general airport revenue bonds. It also affirmed the A rating assigned to subordinate general airport revenue bonds and stand-alone passenger facility charge bonds. It revised its outlook to stable from negative.
Moody's Investors Service assigned an A2 rating to the refunding bonds and affirmed the same rating for existing senior lien bonds and the A3 rating on subordinate and PFC bonds. Fitch Ratings recently affirmed its A rating on senior lien bonds and its A-minus rating on subordinate bonds.
The city has not issued new money for the airport since 2005, instead funding past projects and its $144 million five-year capital program with cash, passenger facility charges, and grants. No new-money issuance is contemplated in the near term although about $240 million in voter approved authority granted in 2000 remains on the books.
After leveling out in fiscal 2011, passenger levels rebounded 5.3% in fiscal 2012 to about 5.2 million. Fiscal 2013 saw a decline of more than 8% to 4.8 million due to reduced service by Frontier Airlines.
The drop brings passenger levels to their lowest level over the last decade and poses a challenge for the credit. Southwest Airlines accounts for about 45% of passengers, which subjects the airport to some concentration risks. The airport's increasing but relatively low cost per enplaned passenger of $5.37 is a key rating factor, Moody's said.
In Iowa, officials last week unveiled a study of a proposed $468 million terminal as part of a major overhaul of the Des Moines International Airport. The current terminal is 65 years old and officials say it's inadequate to handle heavy traffic, larger jets, and other passenger and airline needs.
"We know as we have expanding passenger traffic and all kinds of general aviation traffic we are going to need to upgrade to make sure we can take care of that traffic," said airport authority board chairman Ed Hansell. The city owns the airport land, but the authority board controls the airport.
The new terminal designed by consultants Leigh Fisher Associates would house 14 gates with room for expansion and be located south of the existing terminal. The board is in the early stages of studying the project and a technical report on airport facilities and the new terminal is expected next month. If approved, officials hope to complete it by 2024.
The airport saw a record number of 2.2 million passengers last year, up 6% over a year earlier.
The project would likely rely on a mix of federal grants, passenger facility charges, general airport revenue bonding, and possibly city aid and private funding.
In a report released when it upgraded the airport authority to A last year, Standard & Poor's said the credit benefits from a solid origination and destination market combined with a good air trade service area economy; historically strong high debt service coverage; and a relatively low debt burden with no additional borrowing plans.
Credit challenges include competition from two nearby airports and a moderately high cost per passenger rate compared to other small-hub airports.
New projects could be on the horizon for other capacity-strapped airports, but funding could be a challenge, according to some reports.
An analysis late last year from the Eno Center for Transportation warned that new funding methods are needed for airport infrastructure projects to accommodate growing demand. Some of the largest hub and international airports are already congested, and demand is projected to increase to one billion passengers a year by 2020, up from the current 800 million passengers a year, the analysis said.
The analysis recommends raising the passenger facility charge limit of $4.50 per passenger, and giving individual airports the flexibility to go over the new higher cap to fund infrastructure projects and improvements that would accommodate additional passengers. The current law capping the PFC will expire in 2015.
Heffintrayer said the agency believes some airports should be able to undertake big projects without straining their leverage as they enjoin favorable borrowing rates and have not been burdened by recent issuance.
Commercial and general aviation airports will need $71.3 billion of capital improvements through 2017 for projects considered essential by airports and users, according to a 2013 Airports Council International-North America report.
