AMR dumping 25 of 56 STL gates
09-08-2005, 09:34 PM
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AMR dumping 25 of 56 STL gates
EXCLUSIVE REPORTS
From the September 2, 2005 print edition
American Airlines to drop 25 of 56 gates at Lambert
Heather Cole
American Airlines will shed two concourses with 25 of the 56 gates it leases at Lambert-St. Louis International Airport when it signs a new agreement with the airport before the end of the year.
The move would mean a drop in rent revenue for Lambert at a time when operating expenses are increasing due to the opening of a new runway. It would free up the airport to market the gates to other airlines, but analysts say they could be difficult to fill.
American will continue to operate on C concourse, renting all but a few of the 31 gates there, but would no longer rent gates on B and D concourses, said Brian Kinsey, business and marketing director for Lambert. Although the airline stopped using concourse D and all but four of the gates on concourse B after cutting the number of flights out of Lambert by nearly half in 2003, American continues to pay rent for them under the lease. Lambert receives nearly $3.4 million annually in rent and tenant improvement charges from American for the B and D concourse gates; the amount is $6.3 million for C concourse space.
American also will reduce the amount of cargo building space and surrounding land it rents, but keep the same ticketing areas, Kinsey said. American is paying $1.6 million annually for four cargo buildings, surrounding land and tenant improvements.
American's lease agreement with Lambert expires Dec. 31. The airport and airline are close to concluding negotiations, said Rhonda Hamm-Niebruegge, managing director of the St. Louis hub for American.
Since one airline will no longer be paying to rent the two concourses, that cost will be spread to all the airlines, meaning the cost of renting space will go up, Hamm-Niebruegge said. "At the end of the day it will still be a savings for us, but it won't be 100 percent."
The agreement also covers landing fees of which American paid $1.1 million in July. Part of the cost of the new runway already has been factored into landing fees, said Ken Below, airport assistant director of finance.
Meanwhile, American already has surrendered some space in the C and D concourses -- Frontier subleases two gates in the D concourse, and restaurants and stores, including Chili's and Brooks Brothers, have been or are being added on the C concourse.
While revenue may be down for the airport in some areas covered by the agreement, in others it may be neutral or up, said Jeff Rainford, chief of staff for Mayor Francis Slay. "We do not believe the impact on the airport or City Hall will be significant, but we'll wait and see what the final agreement looks like."
The reduction would come at a time when the airport's operating expenses are increasing, due in part to the addition of the new $1.06 billion runway set to open in spring 2006. Operating costs were $83 million in fiscal 2005, which ended July 1, and are anticipated to be $90.6 million in fiscal 2007, Below said.
"Theoretically, if American doesn't have to pay the rent for the remaining space, it's an incentive for the airport to go out and aggressively market those gates," said Peter Stettler, an analyst with Fitch Ratings. Fitch has a BBB+ rating on Lambert's bonds.
Lambert has had conversations with other carriers but doesn't have a taker for the gates being vacated, Kinsey said. The airlines currently on the A concourse, including Northwest, America West, Continental, U.S. Air, United and Delta, have indicated they don't want to move, he said. Frontier Airlines subleases two gates in concourse D. Southwest Airlines also will stay put at the East Terminal.
Bringing in a new airline will be difficult, and freeing up the gates won't be a big help, said Michael Boyd, president of Evergreen, Colo.-based The Boyd Group. "There's no airline that wants to go into St. Louis that isn't there because of (a lack of) gates."
Major airlines such as Northwest and United have hubs not far away, and Southwest already has a major presence in St. Louis, said Adam Pilarski, senior vice president for Avitas, a Washington, D.C.-based airline consulting company. "They have to do a good job trying to entice people to come in."
From the September 2, 2005 print edition
American Airlines to drop 25 of 56 gates at Lambert
Heather Cole
American Airlines will shed two concourses with 25 of the 56 gates it leases at Lambert-St. Louis International Airport when it signs a new agreement with the airport before the end of the year.
The move would mean a drop in rent revenue for Lambert at a time when operating expenses are increasing due to the opening of a new runway. It would free up the airport to market the gates to other airlines, but analysts say they could be difficult to fill.
American will continue to operate on C concourse, renting all but a few of the 31 gates there, but would no longer rent gates on B and D concourses, said Brian Kinsey, business and marketing director for Lambert. Although the airline stopped using concourse D and all but four of the gates on concourse B after cutting the number of flights out of Lambert by nearly half in 2003, American continues to pay rent for them under the lease. Lambert receives nearly $3.4 million annually in rent and tenant improvement charges from American for the B and D concourse gates; the amount is $6.3 million for C concourse space.
American also will reduce the amount of cargo building space and surrounding land it rents, but keep the same ticketing areas, Kinsey said. American is paying $1.6 million annually for four cargo buildings, surrounding land and tenant improvements.
American's lease agreement with Lambert expires Dec. 31. The airport and airline are close to concluding negotiations, said Rhonda Hamm-Niebruegge, managing director of the St. Louis hub for American.
Since one airline will no longer be paying to rent the two concourses, that cost will be spread to all the airlines, meaning the cost of renting space will go up, Hamm-Niebruegge said. "At the end of the day it will still be a savings for us, but it won't be 100 percent."
The agreement also covers landing fees of which American paid $1.1 million in July. Part of the cost of the new runway already has been factored into landing fees, said Ken Below, airport assistant director of finance.
Meanwhile, American already has surrendered some space in the C and D concourses -- Frontier subleases two gates in the D concourse, and restaurants and stores, including Chili's and Brooks Brothers, have been or are being added on the C concourse.
While revenue may be down for the airport in some areas covered by the agreement, in others it may be neutral or up, said Jeff Rainford, chief of staff for Mayor Francis Slay. "We do not believe the impact on the airport or City Hall will be significant, but we'll wait and see what the final agreement looks like."
The reduction would come at a time when the airport's operating expenses are increasing, due in part to the addition of the new $1.06 billion runway set to open in spring 2006. Operating costs were $83 million in fiscal 2005, which ended July 1, and are anticipated to be $90.6 million in fiscal 2007, Below said.
"Theoretically, if American doesn't have to pay the rent for the remaining space, it's an incentive for the airport to go out and aggressively market those gates," said Peter Stettler, an analyst with Fitch Ratings. Fitch has a BBB+ rating on Lambert's bonds.
Lambert has had conversations with other carriers but doesn't have a taker for the gates being vacated, Kinsey said. The airlines currently on the A concourse, including Northwest, America West, Continental, U.S. Air, United and Delta, have indicated they don't want to move, he said. Frontier Airlines subleases two gates in concourse D. Southwest Airlines also will stay put at the East Terminal.
Bringing in a new airline will be difficult, and freeing up the gates won't be a big help, said Michael Boyd, president of Evergreen, Colo.-based The Boyd Group. "There's no airline that wants to go into St. Louis that isn't there because of (a lack of) gates."
Major airlines such as Northwest and United have hubs not far away, and Southwest already has a major presence in St. Louis, said Adam Pilarski, senior vice president for Avitas, a Washington, D.C.-based airline consulting company. "They have to do a good job trying to entice people to come in."
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