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."
In announcing its decision to keep Lambert's credit rating unchanged, Moody's in October said the airport would remain economically viable for airlines. At the same time, Fitch Ratings downgraded Lambert's rating from A- to BBB+, still considered investment grade.
John Farrell, spokesman for city comptroller Darlene Green, said he didn't know whether his boss agrees with Moody's assessment that the pre-task force financial plan for the airport would be economically viable for airlines. Green, through Farrell, said she favors keeping per-passenger costs as low as possible to keep the airport competitive, but the spokesman would not elaborate, refusing to say whether Green favors the rate proposed by the task force or the higher rate that would require airlines to bear the full cost of runway debt service. The comptroller, in a written response to written questions, also said completing the runway is the primary goal and airport ownership questions are secondary.
But Shrewsbury says there's more to this than simply meeting debt service. Without improvements for passengers and low costs for airlines, Lambert won't grow, he predicts, and the city's image and business prospects will suffer.
"The airport is almost like the taxi driver -- that's your first impression when you come to St. Louis," Shrewsbury says. "Someone who comes to St. Louis and sees a dingy airport with shops closed and ceiling tiles falling off, and rugs and carpeting that's torn and uprooted, they're going to have a bad impression of St. Louis city. Somebody coming to do business and thinking about doing more business in St. Louis very well may judge this city and may judge this metropolitan area based on their experience at the airport."
Darryl Jenkins, a director of the Aviation Institute at George Washington University in Washington, D.C., says it will take more than low passenger fees to restore flights at Lambert. "The problem is, the St. Louis economy is not doing very well," Jenkins said. "If you're going to bring back traffic to Lambert, you do that through improving the economic conditions in St. Louis."