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High Costs
Drive Airlines To Reconsider
Citing the high cost of doing business at Seattle-Tacoma International Airport, Southwest Airlines & King County Executive Ron Sims announced on 14 June that the County and Southwest Airlines were in negotiations to enable low-cost carrier Southwest to shift its local operations from Sea-Tac to King County International Airport (Boeing Field, or BFI). On 23 June, Alaska Airlines said that while it opposed the move by Southwest, if Southwest left Sea-Tac, Alaska would be forced to consider moving some of its flights to Boeing Field. In the mean time, Alaska wants the King County Council to do it a big favor, by refusing to invest in any passenger facilities at BFI that its competitor might use. The Regional Commission on Airport Affairs (RCAA) says that the proposed moves demonstrate the shaky financial basis of the Port's plan for financing its major expansion projects, including the very pricey embankment for the third runway. [See EDITORIAL]. “This sort of move cannot come as a surprise,” said RCAA President Larry Corvari. “RCAA laid out the whole scenario in our September 2004 newsletter – on the basis of public documents & common sense.” We Build (Cost No Object), But You Pay The Port finances a large share of its ambitious Airport expansion projects by issuing bonds, to be repaid from future revenues. Paying these bonds (scheduled to reach $4.7 billion in 2013) will require a lot more revenue. One part of the plan is a big increase in the fees paid by the scheduled airlines. While the airlines were slated to pay $151 million in 2004, the Port plans to collect $378 million from them in 2009 – a 250 percent increase. [TiA 13 Sept 2004 – Table, Airport Financial Forecast] For this, the airlines will gain a bigger, splashier Central Terminal for their passengers to walk through on their way to & from the gates, and a supplemental runway half a mile farther from the terminal, to use when landing in poor weather. Any airline moving to a less-expensive airport in the area (such as Paine Field or Boeing Field) gains an immediate competitive edge on its competitors who stay at Sea-Tac, while passing on that additional $225 million in costs per year to their customers. Choosing the lowest-cost airport in multi-airport markets is a well-recognized element in the Southwest business plan, so a move by that airline was not unexpected. Most observers, however, assumed that the move would be to Paine Field in south Snohomish County. In 2004, two different Snohomish County task forces identified commercial passenger service out of Paine as a goal for economic development, & County officials have signed on to this idea, opposed as it is by the immediate neighbors. If Southwest leaves Sea-Tac, the Port of Seattle will be looking at a potential revenue shortfall in the year 2009 & beyond of roughly $30 million (8 percent of $375 million) – assuming that its place (or its business) is not taken over by other carriers, assuming that the Port cannot make savings in its expenses, and assuming that the Port goes forward with completion of the third runway, with all of its remaining costs. Under present plans, the Port would jack up the fees to the other carriers to squeeze that missing $30 million from them. It is the prospect of this additional cost increase that has made Alaska Airlines wake up & take notice. Sea-Tac To Increase Its Traffic by 171 Percent?? Port of Seattle officials were quick to condemn the prospective move. Port Commission President Bob Edwards was quoted by the Seattle-Post Intelligencer on 14 |