By Ray Downs
By Lindsay Toler
By Lindsay Toler
By Chad Garrison
By Allison Babka
By Lindsay Toler
By Jake Rossen
By Lindsay Toler
The what-me-worry attitude on the plight of Lambert International Airport by city leaders officially vanished last week with the release of a report that suggests the financial wheels are falling off what has historically been a cash cow for St. Louis.
In the report, a task force of business executives that began work in August said what airport officials have never admitted: The $1.1 billion runway, already more than six months behind schedule, may not be finished on time and within budget. If that happens, the city-owned airport -- not the airlines -- will be on the hook when annual debt service balloons from $48.2 million in 2006 to nearly $71.5 million in 2007.
James Shrewsbury, president of the board of aldermen, says that on a scale from one to ten, he's at four in terms of concern about finishing the runway so the debt can be paid. "I know of no reason right now why it won't be done, but you never know what tomorrow might bring," Shrewsbury says.
An airport spokesman flatly declined an interview request with airport director Colonel Leonard Griggs, who last week told the St. Louis Post-Dispatch that he'd stake his life on the runway coming in on time and on budget.
Runway debt service is supposed to be covered by increased fees to airlines, but the airport can't legally hike fees to cover debt on the new runway until planes start using it. Passenger fees would have to increase from $5.83 to $13.54 to cover runway debt, according to current projections, but the task force is recommending that charges be contained to between $6 and $8 through 2009 to keep Lambert competitive with other airports.
Citing a study by Leigh Fisher Associates, a California airport consultant, the Dallas Morning News in November reported the average per-passenger charge at the nation's largest airports was $8.65 in 2003 and was expected to rise to $12.16 in 2009.
The airport should also invest in improvements to make Lambert more attractive to passengers, according to the fifteen-page report that is long on conclusions but short on details. In sum, the task force's solution to the airport's financial woes lies in spending more money while charging airlines less than what the airport must pay in borrowing costs.
The task force says Lambert needs as much as $54.6 million annually to pay for unspecified passenger amenities and to make up for the recommended lower fees for airlines. Just where that money will come from is a mystery.
Mayor Francis Slay hasn't ruled out new taxes, but he's endorsed the task force's recommendation that the city ask other governments for help in exchange for putting the airport under the control of a regional group as opposed to the current airport commission controlled by the city. Shrewsbury says the city doesn't have a choice.
"This is being forced on us by economic realities," he says. "It's something we own in somebody else's neighborhood. If done responsibly and reasonably, metropolitan governance can be a good thing."
But the city will likely pay a price. "Leverage the 5 percent gross-receipts tax the city receives annually from the airport to contribute to a lower cost structure at the airport and demonstrate a commitment to a new willingness to engage regional participation," reads one recommendation written in the tortured prose often used by consultants when delivering bad news. Translation: If St. Louis wants help, it should give up the $5 million or so in taxes that the airport pumps into the city's general fund each year and put that money back into Lambert.
Shrewsbury sounds like a man ready to swallow bitter medicine. "I want to, if at all possible, make sure that the earnings and sales-tax revenue will continue flowing to the city," he said. "I don't know if that's possible, though."
There's no question Lambert is hurting. Between 2000 and 2003, Lambert lost 43 percent of its flights, far and away the deepest dive of any major airport in the nation, according to a January report published by the U.S. Department of Transportation. However, the task force's own numbers show that airlines can cover the runway debt, even if they don't get a break on passenger fees and the airport's passenger projections prove inaccurate.
Presuming the runway is finished on time and on budget, there'll be enough money to pay debt service even under a $13.54 per-passenger charge and even with 1.5 million fewer passengers annually than predicted by Unison-Maximus, the airport's longtime consultant, according to the task force.
Although airport officials believe otherwise, the task force says Lambert won't be able to compete with other airports, including facilities in Kansas City, Chicago and Indianapolis that have much lower per-passenger charges. In Kansas City, for example, the airport charges airlines $3.24 per passenger, but the low cost hasn't led to a boom in business. The number of passengers who board planes annually in Kansas City has fallen by 1 million since 2001.
Civic leaders in St. Louis may be concerned, but Wall Street isn't overly worried. Moody's had considered lowering the airport's credit rating after American Airlines announced flight cutbacks that took effect in November, but chose to keep the rating at A3.
"That's middle-of-the-investment-grade range," explains Anne Van Praagh, an airport analyst for Moody's. "It's about average for the airport sector, although we do have a negative outlook on the airport."