Airport Experience News Fall 2022

FALL 2022 / V20 N243

AAAE, ACI-NA GEARUPFORANOTHER FUNDING PUSH

ROUTE ADJUSTMENTS MAKE SMALL AIRPORTS VULNERABLE

INFRASTRUCTURE FUNDS SPUR TERMINAL INVESTMENT

PERKS, PAY HELP EASE LABOR SHORTAGES

@ SAT

®

Whataburger has arrived! Our Dining Division continues to add new and exciting brands to its portfolio, and we’re thrilled to unveil our first Whataburger location at the San Antonio International Airport . This iconic and beloved brand owns an amazing fan base and will deliver outstanding value to our guests. We look forward to a great partnership with Whataburger and the development of additional opportunities.

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10 PFC Push With the pandemic in the rear-view, airport trade groups are gearing up to again lobby Congress for an increase in the cap on Passenger Facility Charges. Despite significant obstacles, those groups say PFCs are the best funding mechanism for much-needed airport capital projects. 16 Infrastructure Advances Airports are building again as passengers swarm back, with some airports already outpacing 2019 traffic levels. 22 Labor Pains Attracting front-line workers remains a major problem for airport concessionaires, but higher wages, bonuses and other perks are starting to work, alleviating the worst of the shortage. 28 Airline Action Airlines are adjusting their schedules as they right-size and right-balance service. Some airports will reap the benefits while others are vulnerable.

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3 Letter From The Editor In Chief 4 Latest Buzz

Kansas City’s new airport terminal has been in the works for five years and envisioned for many more. With a grand opening just months away, a whole new experience awaits travelers to the midwestern city. 7 Director’s Chair

33 Sustainability Snapshot Paul Hoback of Pittsburgh International Airport shares the many ways the airport is evolving to a more sustainable approach. 36 Advertising Index 37 Before You Take Off Seeing thrown-away food is inspiring more care and less waste under a new pilot program from Areas USA.

Ben Siegel took the helm at the Lee County Port Authority during the pandemic. The

sunshine destination of Fort Myers, Florida, was in high demand in the early recovery, and Southwest Florida International Airport reaped the benefits with increased passenger traffic. Now, a major expansion is underway.

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TEAM

Desiree Hanson Executive Vice President Melissa Montes Vice President/Publisher Carol Ward Editor-in-Chief Jean Claude Chaouloff Business Development Manager

Andrew Tellijohn Senior Reporter Sally Kral Contributing Writer David Ward Contributing Writer

Barbara McCarter Portfolio Manager Chad Wimmer Senior Editorial Art Director Rae Lynn Cooper Production Manager Amanda Gochee Group Marketing Director Paige Heady Senior Marketing Manager Catherine Babbidge Marketing Coordinator

Airport Experience ® News Is a Division of CLARION Events 6421 Congress Ave., Suite 107 Boca Raton, FL 33487 Phone 561.257.1026 Fax 561.228.0882 To subscribe visit https://airportxnews.com/subscribe/ ISSN: 1948-4445 Russell Wilcox Executive Chairman Lisa Hannant Chief Executive Officer, Clarion Events Greg Topalian President and Chief Executive Officer Clarion Events North America Copyright © 2022 Airport Experience ® News, all rights reserved. Any reproduction of this magazine is strictly forbidden without prior permission from Airport Experience ® News.

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FALL 2022

Dear Readers,

FALL 2022 / V20 N243

There was worry over the summer that the dynamic traffic growth achieved by most airports in the first half of the year would falter after Labor Day. Now, several weeks into autumn, that hasn’t happened. Passenger counts remain strong, airports are busy, concessions are thrumming, and it seems the industry is getting back to some sort of normal. But appearances can be deceptive. Passengers aren’t fully back – business and international traffic are still lagging. And both concessionaires and airports have additional debt, taken on during the pandemic, that needs to be addressed. It’s with this mixed result that we look to the future, both in the pages of Airport Experience News and as we plan for the 2023 Airport Experience Conference. This issue of AXN reports on the latest efforts to secure funding for airport infrastructure projects, and highlights some of the projects underway due in part to funding from the Bipartisan Infrastructure Law. This issue also tackles the ongoing labor issues faced by concessionaires and spotlights some of the creative ways operators are addressing the issue. Bigger picture, the AX Team is gearing up for the 2023 Airport Experience Conference in Denver. We’re pulling together a great lineup of speakers and sessions to engage the audience with a forward-looking focus. Please be on the lookout for registration and hotel details, or check out the latest at https://www.airportxnews.com/ax-conference/.

AAAE, ACI-NA GEARUPFORANOTHER FUNDING PUSH

ROUTE ADJUSTMENTS MAKE SMALL AIRPORTS VULNERABLE

INFRASTRUCTURE FUNDS SPUR TERMINAL INVESTMENT

PERKS, PAY HELP EASE LABOR SHORTAGES

Best regards,

Carol Ward Editor-in-Chief Airport Experience News

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LATEST BUZZ

KANSAS CITY RISING Final Touches Are Being Put On The Airport’s New Terminal Building, Slated To Open In March

BY C AROL WARD

he new terminal at Kansas City International Airport ( MCI) is coming to fruition, and it’s been

built on a greenfield site adjacent to the existing terminals, has been in the works formally since 2017 and was envisioned many years before. As early as 1995 and again in 2009, MCI master plans recommended a single terminal. “This is a generational opportunity for us to solve something that worked really great for a very short period of time,” says Justin Meyer, deputy director of aviation – marketing and air service development, Kansas City Aviation Department. Of course, in regards to the new facility currently under construction, the planners

T

Above: A new, 39-gate terminal at Kansas City International Airport is expected to open on time next March, and on budget at a cost of about $1.5 billion.

a long time coming. The new structure that replaces three horseshoe-shaped terminals is scheduled for completion in March 2023, on time and on budget at about $1.5 billion. The three terminal configuration was considered to be at the forefront of modern aviation when it was built in 1972, but changing security protocols in subsequent years resulted in an unwieldy configuration for modern-day travel. The new terminal,

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L ATES T BUZ Z

couldn’t have anticipated the pandemic either, but Meyer says f lexibility is built into the design. We’ve really focused on creating wide open, functional, and adjustable spaces,” he says. “Take, for example, the security checkpoints. We know that airport security is going to continue to evolve. We designed the new security checkpoint area to be really wide open and really adaptable in the new terminal. We’ve tried to future proof as much as possible knowing that there are a lot of things we don’t know.” The new terminal will be a big departure, design-wise, to what is currently in place. While Kansas City voters ultimately approved the project in 2017, the community still had reservations. Meyer says he believes the community will appreciate the attention to detail that went into the new terminal. “We didn’t replace a convenient airport with something that feels more like a Chicago O’Hare or an Atlanta, where there’s lots of walking and trams,” Meyer says. “It’s still going to be an easy facility to use. And once you get to your gate, it’s no longer going to be about [there being] not enough seats, not enough outlets, or nothing to eat,” he adds, referencing the peculiar layout of the current terminal that has security checkpoints every few gates, leading to cramped hold rooms with minimal access to concessions post security.

“We’re going to really shine through all of those expectations of travelers and I’m really proud of the team that’s done the work to get us there,” Meyer adds. The Vision The new terminal is under construction under a public-private partnership agreement, with Edgemoor Infrastructure and Real Estate as developer on the project. Edgemoor is responsible for delivering a 39-gate, one million square foot terminal, a 6,300-space parking garage, a new dual roadway and other landside and airside improvements. Edgemoor Senior Managing Director Geoffrey Stricker notes that his company seized the opportunity to build a brand new terminal – such opportunities are rare in the U.S. because most terminals are renovated and expanded, rather than mothballed in favor of something brand new. “The airport is the first thing people see when they arrive, and the last when they leave,” says Stricker. “We wanted to make this airport terminal represent the best of Kansas City and demonstrate to the world that the world class city of Kansas City has world class airport.” He notes that Edgemoor engaged the community about the design and amenities. The developer also committed to using local businesses in construction. “It was really important to us as a team…to recognize the

impact that this project, which is the single largest infrastructure project in Kansas City’s history, could have onminority and women owned businesses,” Stricker says. “We set very high goals for minority and women-owned business participation on the project, both on professional services and construction” he continues, noting the firm was seeking 20%minority and 15%women participation in both. “We have exceeded every goal that we’ve set out on the project,” he says. Concessions and Amenities As the final months of construction wind down, efforts to ensure a world-class level of concessions and amenities are underway. Top on that list is a new concessions program. In the terminals currently in use, concessions are mainly airside due to the unusual configuration of multiple security checkpoints and very limited post-security square footage. Revenues from concessions are some of the lowest in the United States, on a per-passenger basis. The new terminal, of course, will have wide open access to a predominantly post security concessions program. In October 2021, the Kansas City Council voted to award a $1.5 billion concessions contract to Vantage Airport Group . The agreement, which spans 15 years, calls for Vantage to invest $64 million in the program. Vantage par tnered with OHM Concession Group for food and beverage concessions, and with Marshall Retail Group for the retail component. When complete, 80 percent of the eating and shopping experiences will be local, organized by regionally inspired Kansas City neighborhood zones, including City Market, 18th & Vine, Stockyards, Union Station & Downtown, and Brookside. Vantage said the Kansas City “sense of place” will be achieved with local brands like Made in KC, Bo Lings, Stockyards Brewing, Charlie Hustle, Old World Spices, Bloom Baking Co., Parisi Coffee, City Market Roastery, and more. Vantage committed to achieving 60 percent participation by ACDBEs, vastly exceeding the project’s stated goal of 16 percent.

Left: Open spaces and natural light are key design components in the new terminal, which replaces two horseshoe-shaped terminals currently in use.

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L ATES T BUZ Z

just walk to it. Certainly that’s normal for every other airport but it’s a significant change [for MCI]. It’s the same for other amenities - play areas, rooms for nursing parents, family restrooms - things that are core to the overall travel experience but that have been limited and/or difficult to access in the existing facility.” The Changeover The move to the new terminal won’t be gradual. Instead, sometime in late March 2023, all operations will shift. “We will do a big overnight move, moving everybody from the old terminals into the new terminal, and then we will shut down terminals B and C, which are 50 years old.” Meyer notes the daunting challenge of turning off the light switch in one two-terminal facility one night, and turning on another the next morning. “We’ll be towning airplanes and moving airline equipment from inside the terminals over,” he says. “That will be a really exciting day before the new terminal opens.”

Above: In a sharp design departure from the current MCI terminals, the new building will feature open flow spaces, where any part of the terminal can be accessed by travelers after they have passed through a single security checkpoint. Left: Concessions developer Vantage Airport Group has partnered with OHM Concession Group and Marshall Retail Group to bring a wide range of concessions, with heavy focus on local brands.

Buildout on those concessions is now underway in earnest. Meyer says the airport is expecting a significant increase is concessions revenue, due not only to the stellar lineup of local brands, but also to the new layout that makes them accessible. “With the new layout, once you’re through the security checkpoint, the entire campus is open,” he says. “If you’re flying an airline out of a low numbered gate, but your favorite whiskey bar is by a high numbered gate, it’s no big deal. You

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DIRECTOR’S CHAIR

SUNSHINE DESTINATION Siegel Is Leading RSW To New Heights With $1.5 Billion Capital Program

BY C AROL WARD

ditor’s Note: Southwest Florida International Airport (RSW) experienced only a dip in passenger traffic during the pandemic. While 2020 was an off year, by 2021 the airport was back to setting passenger volume records. With growth comes congestion, a fact that has prompted a major terminal expansion project that is expected to transform the traveler experience. Leading the airport through this transition is Ben Siegel, the executive director of the Lee County Port Authority. Siegel is responsible for the administration, operations and development of RSW and Page Field (FMY) in Fort Myers, Florida. He has served as the executive director since January 2021 and been with LCPA since 1992. AXN’s Carol Ward spoke with Siegel about his vision for the airport going forward. E

WARD: Let’s talk about RSW’s passenger numbers. You’ve experienced strong growth even with the pandemic. What’s the latest? SIEGEL: We started breaking records very early on during the pandemic and are breaking records once again. For example, 2019 was our busiest year in the history of the airport, pre-pandemic. Of course, 2020 had a little bit of a downturn but 2021 was our busiest year again in the history of the airport, and 2022 will be the busiest year in the history of the airport once again. We’ve had some months during 2022 that have broken all-time records in our 40-year history. Things are really booming here in Southwest Florida, and I know they’re booming in the state of Florida. Florida is no stranger to the growth post-pandemic, and honestly through the pandemic. WARD: Do you expect that to continue or are you still feeling pandemic fallout? In other words, looking ahead to ‘23, ‘24, ‘25, do you think passenger numbers will continue to grow? SIEGEL: We’re expecting to continue to grow, although not double-digit growth that we’re experiencing right now. For 2022,

we’re running about 11% up over 2021. For our projections, we’re falling back into the more conservative 3% range. It’s really hard to predict exactly what the airlines are going to push for in terms of capacity here. We do know that with the new concourse coming online in the next few years, that will be a tremendous opportunity for significant growth again. WARD: You have a huge project ahead of you in the terminal expansion project that’s recently been given the green light. Can you give me an overview? SIEGEL: The airport prior to the pandemic experienced a tremendous amount of growth, and we thought during the pandemic we might see a little bit of a reprieve, if you will. However, that was very short term, and our Capital Improvement Program continues to be very robust. It probably sits at about $1.5 billion. The first capital improvement project that we have going on right now is our Phase 1 Terminal Expansion project. I consider that to be the first step to really changing the guest experience completely at the Southwest Florida International Airport.

Above: Ben Siegel, executive director, Lee County Port Authority.

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DIREC TOR’ S CHA IR

We have three decentralized checkpoints right now, and we’re consolidating those into one centralized checkpoint. We’re adding about 125,000 square feet of new terminal concession space, which will completely revamp the concessions experience for our guests. When that’s complete, all of our concourse concessions will be refurbished as well. By 2024 we’ll really have a completely different dynamic look and feel throughout the Southwest Florida International Airport. Phase 2 of the project is more about the growth that we’re experiencing. We’ve launched a new growth plan, which is Phase 2 [of our capital plans]. We will be adding a new concourse, which will be almost like a mini terminal. It will have 14 gates and be connected to our existing facility. We’re probably about 20% under design at this point. It will be connected to the rest of the facility. Although it will end up having its own security checkpoint, you will be able to traverse throughout the entire facility regardless of what checkpoint you go through, whether it’s the new consolidated

checkpoint or the individual checkpoint for this new concourse. The new concourse will have its own inline baggage system, its own concession program, its own ticket counters, and we’re real excited about that. That’s about a two-year design and about a three-year build. WARD: What’s the cost and timeframe for Phase 1? SIEGEL: We’re about a year into Phase 1 of the terminal expansion, and we’re expecting to be substantially complete by the fall of ‘24. It’s a $331 million project. WARD: And what about Phase 2? SIEGEL: Phase 2 is the new concourse, what we’re calling Concourse E. It’s a two-year design and about a three-year build. So once the design’s complete we’ll go out for bid. That project will not start until Phase 1 completed. WARD: You mentioned an expanded concessions and revamped concessions program. What’s your plan? SI EGEL : Cur rently our two master concessionaires are HMSHost and Paradies Lagardère . We’re out on the street for a third [master concessionaire] right now. Our

Top: Southwest Florida International Airport brought travelers to the sunny beaches of Florida even during the pandemic, and growth is continuing this year. Above: The Southwest Florida vibe will be present throughout the expanded facilities, reflected in both design and in concessions offerings.

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DIREC TOR’ S CHA IR

vision for the concessions program is all three of those master concessionaires are going to provide both food and beverage and retail. We’re planning to have obviously a mix of both national brands and a very local mix of flavors with all of the concessions in both food and beverage and retail. We’re going to have a very good Southwest Florida feel throughout our concession programs.

WARD: What will a third master concessionaire do? SIEGEL: The RFP that is out there right now is for a third master concessionaire, that’ll cover about 14,000 square feet of concession space that is primarily being built as part of Phase 1 Terminal Expansion. They’ll provide both food and beverage and retail, just as Paradies Lagardère and HMSHost will now, as part of their contracts, also provide food and beverage and retail. We’re going to have a lot of competition with all three companies at the end of the day. WARD: What’s your approach on the technology side, and what are you looking for from your concessionaires? SIEGEL : We’re obviously looking to incorporate as much of the latest technology we can, although with any technology that’s being incorporated, we want to make sure that we’re taking a hard look at our demographics, because obviously they’re different than a lot of markets. We’re asking our food and beverage and retail providers to make sure we’re providing not just the latest, but also the most user-friendly technology for our guests. In terms of the airport design, I’ve asked the design team to [suggest] a host of technology [options] that we are seeing in a lot of these newer facilities, so we can start taking a look at these technologies and seeing what is cost effective and what we might be able to incorporate into the design for our new facilities going forward. We want technology and innovation to be part of everything that we’re doing and touching going forward, we just need to make sure we do it in a very cost-effective way. WARD: Does your heavy skew toward older passengers impact your approach to technology? SIEGEL: Over time the demographics have gotten a little younger, but also the older generation is much more savvy with technology than they were 10, 15, or 20 years ago. I think our guests are able to deal with technology in a much different way than they were 10 years ago. Although the demographics might still be older than a lot of markets, the demographics have become a little younger, but they’re also much more savvy.

Below: Expansion is underway at Southwest Florida International Airport, both with an expansion and renovation of current terminal space and the planned addition of a new concourse.

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$

FUNDING FOCUS A Return To “Normal” Brings New Urgency To A Persistent Problem BY C AROL WARD

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An increase in or elimination of the cap on Passenger Facility Charges will remain they key goal for airport trade associations as they gear up to advocate for the next round of airport funding. The PFC program allows commercial service airports to impose a fee against enplaning passengers for the purpose of funding approved projects at that airport. The fees are capped at $4.50 per flight segment, and the cap hasn’t been adjusted in more than 20 years. With the need for capital investment in terminals and other infrastructure burgeoning, and with the purchasing power of the PFC worn away by 20 years of inf lation, airports will be pushing hard to convince members of Congress that an increase is necessary. Pushing back, though, will be the airlines, which as a group have long fought against any increase in the PFC cap.

“There are certainly challenges to getting Congress to adjust the PFC and the hurdles have not gone away,” says Joel Bacon, executive vice president, government and public affairs for the American Association of Airport Executives , adding that “I don’t think the airlines will be supportive.” Nevertheless, the PFC cap increase remains the goal for both AAAE and Airports Council International-North America , which typically work side-by side in lobbying efforts for funding. And according to ACI-NA’s 2021 Infrastructure Report, the need for funding is dire. Some alternative funding has come to the fore recently, nevertheless “chronic under f unding,” coupled with the devastating losses suffered by airports during the pandemic, means that airports face a backlog of about $115 in planned and much-needed infrastructure projects, the report said. Both ACI-NA and AAAE have

Above: Airports across the United States are renovating and expanding their airport terminals (rendering for T1 at San Diego International Airport pictured). Funding is a perennial problem, and efforts are again underway to convince Congress of the need for more.

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Web 2022 Airport Fiance Exhibit 1 of 3

A Decline In Passenger Traf c During The Pandemic Has Caused Revenues For U.S. Airports To Plummet

US airports to plummet.

Airport revenue share, by hub size, %¹

Airline landing fees (cargo)

9

14

12

17

Airline terminal rents (hangars and cargo)

17

18

19

27

Passenger spend (eg, food and beverage, retail, parking, rental cars)

25

43

39

8

Passenger facility charges

31

Other ( xed-base operations revenue, fuel sales, land leases, other revenues)

41

12

14

13

16

14

12

Large

Medium

Small

Nonhub

¹ Figures may not sum to 100%, because of rounding. Source: McKinsey & Company, utilizing Federal Aviation Administration form 5100-127, 2019 data aggregate by airport type

advocated for years for an increase in the PFC cap, and that push will continue in the coming year. “There comes a time when you look over the horizon and realize there’s no way of getting where we need to go, absent some sort of adjustment to the PFC,” Bacon says. Unusual Blips Federal funding for airports has been anything but usual in recent years. In response to the devastation caused by the pandemic beginning in March 2020, Congress approved the 2020 Coronavirus Aid, Relief and Economic Security Act, which provide $10 billion for airports. The Coronavirus Response and Relief Supplementary Appropriation Act, passed at the end of 2020, included nearly $2 billion for airports. The money wasn’t for infrastructure, however. It was doled out to keep airports afloat during a catastrophic event for the industry, but it did allow some airports to continue infrastructure work that might otherwise have been tabled. The 2021 Bipartisan Infrastructure Law, on the other hand, included $15 billion for infrastructure

grants to commercial service, general aviation, and contract tower airports over five years along with $5 billion for a new airport terminal program and $5 billion for FAA facilities and equipment. For fiscal year 2022, $2.89 billion has been made available to U.S. airports. Finally, the FAA’s standard Airport Improvement Program provides more than $3.18 billion annually to airports, although the vast majority is designated for airside improvements and can’t be used for terminal projects. AAAE and ACI-NA say the overall federal funding falls far short of the needs faced by commercial airports in the United States. Compounding the issue is the fact that PFC revenues have been sharply reduced due to the lower passenger traffic experienced by airports in 2020 and 2021. The airport industry can look to the success it had in getting the pandemic prompted funding and use that model in its push for a higher PFC cap. Annie Russo, chief political and congressional strategy officer at ACI-NA, said at the trade group’s recent annual convention that it will seize on that success to push its agenda forward.

“One of the really important lessons that I think the industry learned [during the pandemic] and, quite honestly, the reason for the great success we had in receiving funds from the federal government was that we got the messaging right,” Russo said at the September conference. “It was easy and simple to understand…. Because we spent so long trying to explain airport financing and airport funding, members of Congress and senators, they really got it and they helped us. “We need to piggyback on that good work that we have done over the last few years, get our messages right…and take advantage of the political landscape in order to have success on that bill,” Russo added. That political landscape is challenging no matter which party is in power, but each scenario requires a different approach. “We really have to put everything we’re talking about in context of what the possibilities are and what the political landscape looks like post-election,” she said, noting that the messaging shifts depending on which party is in the majority. Bacon notes that a PFC cap increase is “never an easy lift for Congress but we’ll keep aggressively pursuing it.”

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Members of Congress have been tough to the convince over the past two decades despite aggressive lobbying from industry trade groups. One key reason is that the other half of the aviation sector – the airlines – vehemently opposed a PFC cap increase. They’ve successfully characterized the PFC as a tax, while airports continue to argue that the PFC is a user fee. The U.S. airlines, through trade group Airlines 4 America, have spent a similar number of years trying to thwart the efforts of the airports. A4A’s “Stop Air Tax Now” campaign calls the PFC a “hidden tax” on airline tickets. Core arguments from the airlines include healthy balance sheets from airports with money that could be used to fund infrastructure, high airport revenues from concessions, parking, rental cars and PFCs, and airports’ ability to finance through the bond market. Airlines also argue that they themselves invest heavily in airports, a point that Delta Air Lines CEO Ed Bastian hit home in a discussion at the recent ACI-NA conference. Bastian pointed to the significant

investments Delta and other airlines have made. “We’re always pushing for more in, in terms of making that investment,” he said. “Delta has invested, over the last five years, $12 billion of its own money. This is part of who we are, in terms of taking ownership.” He added that airline involvement in the funding process is critical, but higher PFCs are not the answer. “You can’t push it on the operators and the operators can’t push it back onto the customers,” he said. “We’ve all got to work together.” Airports, however, argue that while airlines invest heavily in their key hub markets, there is a large number of airports around the country that see little or no direct airline investment. Tweaking The Formula Airports have support from a broad swath of the aviation sector in their pursuit of an increase or elimination of the cap on PFCs. The Reason Foundation , for example, in September released a paper in support of elimination of the cap.

“Two findings support modernizing the passenger facility charge,” writes senior transportation policy analyst Marc Scribner. “First, evidence suggests that PFC use has a positive effect on airport efficiency while AIP use has a negative effect. Legislation introduced in previous Congresses would have uncapped the PFC while proportionately reducing AIP authorized spending, with this change in the PFC/AIP mix expected to result in greater airport productive efficiency. “Second, major non-aeronautical revenue sources, especially revenue from parking and rental car fees, were facing heightened risks and declining prospects prior to the pandemic as travelers opted for new ride-hailing ground transportation services to and from airports,” the paper continues. “Pandemic-related concerns about shared transportation may have temporarily shifted traveler preferences back to driving modes that support parking and rental car revenue, but how long this will persist is highly uncertain. Since the PFC charges airport terminal users regardless of their use of terminal concessions, it represents a lower-risk, predictable, and sustainable revenue source.” Steve Van Beek, a director at Steer , suggests a tweak to the current PFC programmay be in order. Currently, airports can charge up to $4.50 per flight leg, for a maximum of $9 on a one-way trip. For small airports though, the $9 user fee hitting the ticket price for most of their passengers – who typically connect through a larger hub – can be burdensome, and smaller airports already carry higher ticket prices on average. Similar to the approach in Canada, flexibility in fee application might be a solution, Van Beek argues. “Places like Vancouver and Toronto charge a lower fee for regional or connecting traffic and yet have their full [airport improvement fee] for their long-haul traffic,” he says. The point is to give airports some rate setting powers. “This would allow airports to set the rate of the PFC for different markets: international, transborder, domestic and for connecting f lights,” Van Beek says. Because non-connecting passengers will typically pay a higher airfare than connecting passenger, this approach makes sense from a price-impact

U.S. Airports Face A Backlog Of Planned, Essential Infrastructure Projects Totaling $115 Billion.

Airport infrastructure needs, by type of development, $ billion

Updating to FAA ¹ standards

Air eld reconstruction

Safety 3.4

11.7

20.3

New airports 2.1

Air eld capacity

Security 1.3 Environment 1.6

Terminal buildings

11.3

Other ²

Terminal access

40.1

15.5 8.2

$115bn total

¹ Federal Aviation Administration. ² “Other” includes construction and rehabilitation of fuel farms, hangars, parking lots, and utilities. Source: McKinsey & Company and Airports Council International

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perspective, he says. And lower fees on connecting traffic would “not excessively discourage” small community air service that typically operates with a stopover at a hub. Other Sources The popularity of public private partnerships to help finance terminal projects or key aspects of projects in U.S. airports has ebbed and flowed in recent decades. There have been a handful of high profile projects, such as the redevelopment of LaGuardia Airport (LGA), terminal projects at John F. Kennedy International Airport (JFK), and a few others, but the method hasn’t taken hold on a broad-based level. Van Beek notes that the ebb and flow is more perception than reality. The P3 market is “chunky” he points out, because the ones undertaken in the U.S. market are typically very high profile, massive projects. “When one is not going on, it looks like P3s are going down, but when one is underway it looks like they’re on the rise,” he says. Some smaller projects are beginning to get traction, he adds, and more likely on the horizon. “If there are fewer federal dollars for infrastructure spending and there are lower PFCs, because Congress doesn’t raise it, I think the inevitable result will be more P3s,” Van Beek says.

“It’s important for people to understand that P3s don’t create money, but they do bring money forward,” he continues. If you have a 30-year concession and a private operator agrees to build it, manage and operate it, they can recover their investment over 30 years, and they can make money. Whereas an airport can never make that investment if there’s not enough PFC money or AIP funds. At the end of the day, there’s got to be a mechanism to be able to build and update your infrastructure. And if it doesn’t come from the federal government, and if it can’t come from the airports through a PFC, then you’re going to see more public private partnerships.” Going forward, it will be a combination of public and private investment that will be invested to ensure airports in the United States are modernized and maximized for air travel over the next several decades. In announcing grant awards from the bipartisan infrastructure law, U.S. Secretary of Transportation Pete Buttigieg said that “Americans ought to have the best airports in the world.” Whether through traditional funding methods, infrastructure law funds, private money or other means, U.S. airport executives are on a quest to ensure that they do.

Above: The new LaGuardia Terminal B (arrivals level pictured) was built under a public-private-partnership. LaGuardia Gateway Partners (LGP) is the manager and developer of the terminal.

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After a “Pandemic Pause” That Slowed Or Tabled Airport Capital Projects, New Funding And New Demand Are Driving Growth Again

Below: A planned newTerminal E at Boston Logan International Airport will be built as demand warrants.

BY C AROL WARD

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Earlier this year, U.S. Secretary of Transportation Pete Buttigieg said that “Americans ought to have the best airports in the world.” Airports throughout the country seem to agree, and many are in the midst of, or are embarking on, major capital projects despite the current recessionary pressures and COVID hangover. Several U.S. airports are pushing forward aggressively with expansions and renovations. Some are restarting projects put on pause during the pandemic, while others pushed through despite the unprecedented downturn in traffic that event caused. Now, the rapid return of travelers means the infrastructure crisis that was apparent pre-pandemic is just as pressing today.

Airports in the U.S. are, on average, more than 40 years old, and many are in dire need of upgrades. The 2021 Infrastructure Report from Airports Council International North America estimates that airports’ infrastructure needs for 2021 through 2025 amount to $115.4 billion. That figure is, of course, far higher than airports can afford, continuing what has become a chronic shortage of federal funding for airport projects (see related story, page 10). Airports were aided during the pandemic by a series of coronavirus relief funding packages. A boost in infrastructure funding followed with the passage of the Bipartisan Infrastructure Law in 2021, with the first tranche of grants made available last summer.

The inf rastructure law provides $15 billion for infrastructure grants to commercial service, general aviation, and contract tower airports over five years along with $5 billion for a new airport terminal program and $5 billion for FAA facilities and equipment.

Below: A new facility connecting the B and C Terminals at Boston Logan International Airport gives the airport flexibility to maximize gate utilization in the crowded terminals. Bottom: Road congestion is a constant frustration for passengers flying through Boston Logan’s Terminals B and C, but a project is underway to separate and streamline the traffic.

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Right: Des Moines International Airport has been eyeing a new terminal for nearly a decade. Now, with enough funding in place to start the project, the vision can begin to reach reality.

In announcing the awards for fiscal year 2022 last summer, U.S. Transportation Secretary Pete Buttigieg said the investment “couldn’t have come at a more urgent time. “Right now, more people than ever are relying on air travel to see their loved ones and move goods around the country and the world,” he said in an early July speech in Los Angeles. “And we’ve seen airports and airlines struggling to meet that extraordinary level of demand.” Buttigieg noted the need to modernize airports to ensure they are prepared not only for the short-term demand spike but to serve passengers over the coming decades. More than 80 airports received infrastructure grants earlier this year, from nearly $50 million to help fund a new concourse at Washington Dulles International Airport (IAD), to $24 million for the new Terminal 1 at San Diego International Airport (SAN) to $5 million, to Texarkana Regional Airport (TXK) to ensure completion of a terminal expansion currently underway. Most grants came in under $15 million While the individual funding grants make up a small portion of the cost of each project, they’ve been helpful in pushing projects forward. Below are four airport projects that have been aided by the infrastructure law. New Configuration, Expansion At BOS Boston-Logan International Airport (BOS) is hip deep in major capital projects that will streamline passenger movements, ease crowding at the curb and at the terminal gates and modernize and expand facilities. The expansion and renovation program started well before the pandemic hit in 2020. The crisis forced executives to rethink some aspects of the project, but ultimately the bulk of the planning stayed on track.

“As you can imagine, as we were going into COVID we had to make some tough decisions of ‘go or no-go’,” says Dan Gallagher, director of aviation finances for BOS. “And really, we had to make the decision to go. For various reasons we knew the demand was going to be coming back. It was the right decision to continue the project for a whole host of reasons.” BOS received $62 million from the infrastructure bill, a sliver of the cost for its current capital program. BOS’ Terminal B-C Connector project was finalized earlier this year, providing new and renovated facilities in Terminal C, a new post-security connection to Terminal B, a consolidated security checkpoint, expanded food and retail concessions and passenger amenities and other amenities. An ongoing project at BOS is the B to C roadways project that will revamp the terminal roadways to minimize backups and get passengers to and from the terminals more quickly. Waiting in the wings is a Terminal E, with plans for a roughly 320,000 square-foot building addition and renovations to the existing building. Gallagher says flexibility is key going forward. “The fact that we’re connecting those [B and C] terminals, it gives us such greater flexibility for both the passenger and for the airlines to actually fly what the market really demands,” he says, noting that the prior layout without connectivity left the airport with minimal flexibility. The Terminal E expansion and renovation was originally scheduled to be well underway by now, as the airport had

decided pre-pandemic to undertake Phase 2 of its capital plans concurrently with Phase 1. The pandemic changed that approach. Now, Gallagher says, some minor work has been completed, but the airport has decided to “value engineer or descope as appropriate.” Phase 2 will be triggered when the demand warrants, he says. Terminal E is BOS’ international terminal, but Gallagher says the cyclical nature of international operations and heavy demand for domestic operations call for a flexible approach. “Some of the projects we’re adding at Terminal E are going to allow us to operate some domestic f lights out of an international terminal instead of building on more domestic gates,” he says. “It’s really about flexibility and being responsive and adaptive, because we get a lot of curve balls, and if the infrastructure isn’t there you can’t do a lot.” Long-Awaited Terminal For DSM Officials at Des Moines International Airport (DSM) have been planning for a new terminal for a decade or more, and have been scrambling for the money to make it happen for as many years. The project, at an estimated cost of $770 million, is finally in the design stage and some enabling projects are already underway. The Bipartisan Infrastructure Fund contributed $5 million to the design process, a drop in the bucket compared to overall need but welcome nevertheless for an airport that has been working every

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angle to cobble together the money needed to make a new terminal a reality. “We have been out soliciting funding for the terminal since 2014 and we’re finally at the point where we’re ready to start,” says Kevin Foley, airport director. “We’re going to have to do it in phases as we don’t have the $770 million that’s going to complete this project in its entirety.” The first phase will focus on the ticket counters, security screening checkpoint and baggage handling system. “Out of that we could get five, and potentially six, new gates, Foley says. Congestion is an ongoing challenge at DSW, prompting the need for the new terminal. “The primary concern is that we’re running out of space to park airplanes, and we have interest in additional passenger service,” Foley says, noting that “Des Moines is rapidly growing and the central Iowa region is rapidly growing, which has led to increased interest from airlines.

“There’s also congestion in the terminal itself,” he continues. “During peak periods we have passengers sitting on the floor of the concourse, and we’re out of restaurant space and restroom space. The amenities for passengers are stretched to the limit.” Finally, Foley says, it’s simply time to replace the 75-year-old current terminal. “Though it looks good, behind the walls the supporting systems are having some problems that would be very expensive to rehab,” he says. “It’s just time for a new facility.” Missoula’s New Digs A new terminal is also underway at Missoula Montana Airport (MSO), a project that will right-size and, more importantly, reconfigure the terminal to meet the needs of today’s travelers. Phase 1 of the project, which included ticket counters, a new security checkpoint, four departure gates and temporary baggage

claim and rental car facilities, opened in June of this year at a cost of $67 million. Currently underway is a deconstruction of the old terminal building to prepare for Phase 2, which includes a permanent baggage claim area, four additional gates, additional restrooms and a permanent rental car facility within the terminal. “That’s a $42 million project,” says Brian Ellestad, airport director. The infrastructure fund money awarded to MSO, totaling $11 million, will come in handy. “One reason why that discretionary grant was so important to us is that it allows us to honor our commitment to the airlines and not raise rates,” Ellstad says. “We’ll be able to

Below: Reconfiguration for today’s realities was a key driver in a new terminal currently being built at Missoula Montana Airport. The 75-year old existing terminal had space in all the wrong places, but the new facility will rectify that challenge.

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Growing Rapidly In Chattanooga Chat t anooga Ai rpor t ’s (CHA) infrastructure grant money totaled just $5 million, but it takes a big bite out of the $28 million budget for a much-needed terminal expansion currently underway. “We had our method for funding the project already completed” when the airport decided to apply for an infrastructure grant. The award “means I can use that money and not have to use $5 million in PFCs for this,” says Terry Hart, airport director. The expansion is in response to the findings of a master plan completed in 2019, that predicted continued growth over the next 20 years for the small Tennessee airport. CHA was running out of terminal parking and moved forward on a parking garage built during the pandemic. At the same time, design of a terminal expansion was underway. The expansion, which began over the summer, will increase the size of the security checkpoint to accommodate additional lanes. More boarding bridges, gates and restroom facilities are also part of the project, as are additional concessions spaces. “We know that this community is going to grow and to be able to support the growth we need additional facilities around the passenger terminal,” Hart says. CHA’s traffic has been a bit slower than average to come back, in part because of its heavy reliance on business travel, which made up about 70% to traffic pre-pandemic. Pre-pandemic, CHA was growing each year, doubling enplanements in seven years to reach 554,000 in 2019. Hart says he’s confident more growth is in the future. “It’s going to continue to grow because of what’s happening in the community - the airport has a good vibe and people like what’s going on,” he says. “ They love the parking garage and are excited about the terminal expansion. There’s a lot of positive things happening that have the community excited about the airport.”

move into a new building and be flat on rates and charges for our tenants.” MSO’s old terminal was built in 1948 and has had various remodels in subsequent years. “It was properly sized but the space was in all the wrong places,” says Ellestad, noting the vast pre-security lobby and gate areas designed for small regional jets that are no longer used. It was also inefficient from an energy usage standpoint. Flexibility is key with the new terminal design for the growing airport. “We don’t overbuild, we just build what we need for today and for the immediate future,” Ellestad says. “We have common use on all our gates so we shuffle carriers around as needed. And this new building will be easily expandable and we can add bits and pieces as we grow.”

Above: A terminal expansion at Chattanooga Airport will add new facilities to accommodate growth that is anticipated as pandemic recovery continues.

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STAFFING UP Labor Shortages Forcing Creativity In Concessions Hiring BY ANDREW TELL I JOHN

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Paradies Lagardère hasn’t solved all its staffing and labor needs, but the company has significantly narrowed the gap. The retail and food giant has created partnerships with several organizations in the local markets where it serves airports, such as Arizona at Work in Phoenix. It’s working with veterans’ groups and groups that support people with disabilities to find employees. Working with local organizations in its airport markets has been a big help, says Donna Barton, vice president of human resources. “It’s actually exciting,” she says. “We are making progress in many different areas.” Under exploration now is recruitment processing outsourcing, which would bring an outside firm in to help screen, interview and extend offers to workers so the company’s internal staff could focus on making sure those who do sign on stay. “It frees up their time to focus on onboarding, engagement and training of those new employees,” she says. Flexible Hiring, Earlier Training, Beating The Badging Process Seven months ago, as traffic was inching back up toward pre-COVID levels and demand for restaurants and retail venues was growing, operators struggled mightily to find and retain staff. And it still isn’t easy. Andy Weddig, executive director of the Airport Restaurant & Retail Association, says the same long-term challenges – getting to the airport to work, getting through security lines, parking onsite – are still applicable. In addition, he says, airports must also contend with burdensome increased labor costs and with Amazon, which “has been busy not only setting the wage rates in this sector of the economy, but they’ve also sucked in the excess of employees.”

As such, retention bonuses and increased wages already set above what similar locations might pay on the street have become routine. And most companies would likely not consider themselves fully staffed, by any stretch, he says. That said, many operators around the industry have gotten creative and found some new strategies for filling their staffing vacancies and retaining their workers. Another tactic employed by Paradies Lagardère and others is getting new employees in for training right away so that when they get approval for a badge from the Transportation Security Administration, they are ready to hit the ground running. Paradies Lagardère is working with airport partners to try to find pre-security space where it is available. If it’s not, the company is renting space in the community where the company can mimic airport concessions scenarios workers will face when they start. “Having the location that allows us to give them thorough training before we actually have them on the floor customer facing, we need to do that behind the scenes,” Barton says. “That’s another area we are really focused on right now, which is going to make a huge difference – is already starting to make a huge difference – in retention.” SSP America also has been trying to mitigate the badging process by having new hires start working right away in pre-security locations where possible. “If we can somehow get around the waiting period for badging – not all airports will allow somebody to work in a pre-security environment without a badge – when we can, we are trying to do that,” says Deputy CEO Pat Murray. High Flying Foods has seen its staffing situation improve significantly in the last six months. President KevinWestlye credits the company’s expanded human resources team for some of the improvements.

Left, Above: Paradies Lagardère has worked with organizations in local markets to identify and hire workers, and with airports to find pre-security space to train them so they’re ready to work when badged.

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