CHICAGO – St. Louis is seeking federal approval to explore a privatization of St. Louis Lambert International Airport as a means to generate private investment in the airfield and funds for city use.
Mayor Francis Slay announced the city's submission of a preliminary application with the Federal Aviation Administration seeking to reserve a slot under the Airport Privatization Pilot Program. The program allows for private operation of airports that have received federal funding.
"If the FAA accepts our pre-application, we will have an opportunity to explore whether this is the right option for St. Louis," Slay said in a statement. "We owe it to taxpayers and the airport's users to reap the maximum benefits of the airport, and we believe this pilot program has the potential to do just that by improving airport revenue through private partner innovation, diversification, and improved use of land assets."
The city wants to explore whether a privatization could generate upfront payments, payments over time, or both, that can be used for non-airport city purposes, including transportation and public safety projects. Federal laws require that airport-generated revenues be spent at the facility.
The city statement further said private investment could help the airport achieve its strategic goals which include improving operating revenues through private partner innovation, diversification, and improved use of land assets.
"Under a public-private partnership, the city would receive an immediate capital infusion for non-airport uses or the city also may choose to receive substantially increased annual payments," the statement said.
Under the program, the city could lease the airport and its operations but would retain ownership rights. The city hopes for preliminary approval this spring with the city's review then expected to be conducted over the next year. If the city moves forward, the FAA and a majority of Lambert airlines would need to approve as well as the city council.
The FAA has received a total of 11 applications since the program was approved in 1996 allowing airports to enter into long-term operating leases or pursue the sale of a facility to a private firm. The 2012 Reauthorization Act increased the number of airports than can participate from five to 10.
Under the program, the airport owner or lease holder may be exempt from repayment of federal grants, return of property acquired with federal assistance, and the use of proceeds from the airport's sale or lease to be used exclusively for airport purposes.
Westchester County Airport is the most recent to seek approval to hand airport operations over to a private operator, filing an application late last year. Chicago sought to privatize its Midway International Airport on two occasions but dropped the plan due to limited interest and withdrew its application in 2013. The FAA approved the privatization of Puerto Rico's Luís Muñoz Marín International in 2013.
Lambert has about $650 million of revenue debt that carries ratings of BBB-plus from Fitch Ratings, A-minus from S&P Global Ratings, and an A3 from Moody's Investors Service.
Last November, Fitch revised the airport's outlook to positive from stable on its rating.
"The positive outlook reflects the expectation that continued enplanement growth in conjunction with a renewed airline agreement providing full cost recovery terms will allow Lambert-St. Louis to maintain stable debt service coverage ratios and experience moderate reductions in leverage and airline costs," Fitch wrote.
Southwest Airlines accounts for about 51% of the 6.7 million of passengers who traveled through the airport in 2016. Passenger traffic grew by 6.7% form 2015.
The airport has a five-year capital program totaling $170 million. The plan relies on the issuance of up to $86 million in general airport revenue bonds for the projects, with the remainder being funded with the airport's development fund and other equity sources.