Miami International Caps Future Airline Fees In Effort To Stall Aviation Industry Tailspin
Written by Paola Iuspa on March 20, 2003
By Paola Iuspa
A gloomy forecast is prompting county aviation officials to reduce a future cap on fees charged airlines – revenue banked on for Miami International Airport’s ongoing expansion.
This month’s annual review of the airport’s $4.8 billion capital project is prompting officials to cut planned charges that would fund terminal upgrades and operating expenses, Aviation Director Angela Gittens said.
With an industry in crisis, some major carriers bankrupt and US travel on the decline, officials sliced the maximum boarding fee they will charge airlines from $40 a passenger to $30. The fee was to hit $40 by 2015, the year Phase I of the capital project is to be finished, Ms. Gittens said.
"Now it will be $30," she said. If the county wants to keep the $4.8 billion project going, she said, the fee can’t go lower.
If Miami-Dade County commissioners choose to slash that fee more, she said, her department won’t be able to raise enough to fund the expansion.
Bonds that also must be repaid with airport-generated revenues will finance much of the work.
Airlines at Miami International today pay about $14.66 a passenger, up from $13 a year ago. That fee includes such airport services as maintenance and security, staffers said. Airlines pass some of this along to passengers in ticket prices, but travelers are increasingly shopping for the lowest fares.
Since the boarding fee is to rise in steps over 12 years, the $30 cap could cut the risk of losing airlines trying to save by moving to lower-cost airports, a recent department report said.
John F. Brown Co., consultant to the department, reported in late 2001 that $40 a head could cut boardings 5% due to airlines shifting routes elsewhere. But under current industry forecasts, the report said, that risk could top 14%.
An aviation department report found last year that the airport’s boarding fee was one of the highest among major airports. For example, international airports near Fort Lauderdale, Atlanta and Houston a year ago were charging about $5 while those serving Washington, Chicago, Orlando and Dallas-Fort Worth were at about $10. New York’s JFK charges $40, according to a Miami-Dade Aviation Department report.
Having to cut future charges yet proceed with the $4.8 billion expansion will force her team to choke expenses, Ms. Gittens said.
"We need to increase revenues and reduce operating costs," she said.
A new airport retail program budgeted at about $500 million promises to yield more cash from non-airline operations. Aviation officials are now seeking proposals to develop and run 37 stores across the central terminal.
One billion dollars of the capital project is done, with $2.5 billion in construction and $600 million in design or procurement, in all 85% of the total program. An additional $700 million is being planned, and officials say $130 million in new contracts will be awarded this year.