Char­lotte’s air­port ex­pands to new vi­sion

The Charlotte Observer (Sunday) - - Front Page - BY ELY PORTILLO ely­por­[email protected]­lot­teob­server.com

Char­lotte’s air­port built it­self into a pow­er­house by rig­or­ously stick­ing to its roots as a low-cost hub that con­nects trav­el­ers be­tween planes as quickly and cheaply as pos­si­ble.

But the nine gates open­ing at Char­lotte Dou­glas In­ter­na­tional Air­port this week in a new con­course aren’t just a ma­jor ex­pan­sion to the air­port’s ca­pac­ity.

With more space for trav­el­ers, mul­ti­ple out­lets to charge de­vices in ev­ery seat, a soar­ing glass fa­cade with in­ter­net-con­nected panes of glass that change to reg­u­late light — not to men­tion 2,000 square feet’s worth of and dig­i­tally gen­er­ated LED art­work on puls­ing screens that cover three walls — the gates rep­re­sent a new vi­sion for Char­lotte Dou­glas, one with more fo­cus on “pas­sen­ger ex­pe­ri­ence.”

It’s the first part of the air­port’s $2.5 bil­lion ex­pan­sion and ren­o­va­tion pro­gram to open.

The plans also in­clude ren­o­vat­ing the ex­ist­ing con­courses, build­ing more gates and adding a run­way. With growth, how­ever, comes added ex­penses. The cost per pas­sen­ger at Char­lotte Dou­glas — largely paid by pri­mary car­rier Amer­i­can Air­lines — has in­creased more than 50 per­cent over the past decade, though it re­mains well be­low com­pa­ra­ble air­ports.

“That is a tricky bal­ance,” said Brent Cagle, avi­a­tion di­rec­tor at Char­lotte Dou­glas.

The air­port is city-owned but in­de­pen­dently op­er­ated and fi­nanced. “We know our (costs) will rise. That’s just the nat­u­ral or­der of things. We’re on the front end of a large cap­i­tal pro­gram, and that will lead to in­creas­ing costs.”

The air­lines that lease space at Char­lotte Dou­glas all gave their OK to the new gates, which will in­crease the air­port’s gate ca­pac­ity by al­most 10 per­cent. Cagle said the air­port’s pro­jec­tions show its per-pas­sen­ger costs will re­main be­low those of com­pa­ra­ble air­ports, even af­ter fac­tor­ing in ex­pan­sion costs.

Cagle said the new gates — which will serve non-Amer­i­can Air­lines car­ri­ers, in­clud­ing Jet­Blue, United Air­lines, South­west, Fron­tier and Air Canada — will start re­liev­ing con­ges­tion im­me­di­ately.

“We’re literally at 100 per­cent ca­pac­ity for the (ex­ist­ing) gates,” which see an av­er­age of eight flights each per day, Cagle said. Too of­ten, Char­lotte Dou­glas hears from pas­sen­gers with a sim­i­lar story, he said: “‘Great, got to Char­lotte 30 min­utes early — sat on the ramp for a half-hour.’

“That hap­pens ev­ery day. That’s re­ally frus­trat­ing for pas­sen­gers,” Cagle said. “This will be the first step in help­ing to re­lieve some of that ramp con­ges­tion.”

THE NINE GATES THAT ARE ABOUT TO OPEN REP­RE­SENT A NEW VI­SION FOR CHAR­LOTTE DOU­GLAS, ONE WITH MORE FO­CUS ON ‘PAS­SEN­GER EX­PE­RI­ENCE.’

But the specter of on­ce­boom­ing air­ports that have been “de-hubbed” still flit around con­ver­sa­tions about Char­lotte’s fu­ture. Air­ports like Pitts­burgh In­ter­na­tional and Mem­phis In­ter­na­tional that once hummed with pas­sen­gers and built ter­mi­nals to ac­com­mo­date huge growth pro­jec­tions are now deal­ing with the new re­al­ity of empty gates and silent con­courses.

At Mem­phis, of­fi­cials are plan­ning to close 60 gates at the for­mer North­west Air­lines hub af­ter the num­ber of pas­sen­gers fell from about 11 mil­lion in 2007 to 4 mil­lion last year. Air­port ex­ec­u­tives at the for­mer US Air­ways hub at Pitts­burgh are forg­ing ahead with a $1.1 bil­lion plan to re­duce the num­ber of gates from 75 to 51 (the air­port uses just 39 gates now, ac­cord­ing to the Pitts­burgh Post-Gazette) and mod­ern­ize the fa­cil­ity.

“You never want to be over­built, and we’re not. Our pro­gram is com­pletely scal­able,” said Cagle. “If the world changes ... we can slow it down and stop it if we need to.”

The num­ber of pas­sen­gers at the air­port has in­creased steadily, ris­ing 3 per­cent to a new record of just un­der 46 mil­lion last year. That’s up dra­mat­i­cally from 2007, when about 33 mil­lion pas­sen­gers trav­eled through Char­lotte Dou­glas. Amer­i­can Air­lines has added a dozen des­ti­na­tions since 2017, in­clud­ing Toledo, Ohio; South Bend, Ind.; Panama City, Fla.; and Bar­ba­dos.

Amer­i­can Air­lines will gain ac­cess to four more gates in the ex­ist­ing Con­course A af­ter they’re ren­o­vated, po­ten­tially al­low­ing the car­rier to ex­pand.

“We’re look­ing for­ward to that. It’s ex­cit­ing,” said Dec Lee, the head of Amer­i­can Air­lines’ hub in Char­lotte. It’s the com­pany’s sec­ond-busiest, af­ter Dal­las/Fort Worth.

HIGH FARES FOR LO­CALS

Char­lotte Dou­glas re­mains ex­tremely de­pen­dent on Amer­i­can Air­lines, which op­er­ates its sec­ond­bus­i­est hub at the air­port. More than 91 per­cent of pas­sen­gers at Char­lotte’s air­port flew on Amer­i­can Air­lines in fis­cal 2017.

Most pas­sen­gers are trans­fer­ring from one plane to an­other, not start­ing or end­ing their trip at the air­port. That means Char­lotte is par­tic­u­larly vul­ner­a­ble to any shifts in routes from Amer­i­can Air­lines that re­duce the num­ber of con­nec­tions.

Air­port ex­ec­u­tives point to the grow­ing share of lo­cal trav­el­ers, how­ever.

In fis­cal 2017, the share of lo­cal fliers rose much faster than the air­port’s traf­fic as a whole, jump­ing more than 6 per­cent. That means the lo­cal travel mar­ket is strength­en­ing, with in­creas­ing de­mand from peo­ple who live in Char­lotte.

Still, roughly 7 out of ev­ery 10 trav­el­ers con­nected through the air­port vs. just 3 out of 10 who started or ended their trip at Char­lotte.

Fi­nan­cial state­ments paint a mostly rosy pic­ture for Char­lotte Dou­glas. The air­port’s rev­enue in fis­cal 2017 rose more than 4 per­cent, to $294 mil­lion.

Ex­penses jumped at a faster clip, how­ever, ris­ing more than 8 per­cent, to $237 mil­lion.

But the air­port’s avail­able net rev­enue to cover its debts re­mained “ex­tremely strong” at 5.4 times the level re­quired by out­stand­ing bonds, the air­port said in its most re­cent fi­nan­cial re­port. And Char­lotte Dou­glas has enough cash on hand to fund more than four years of its op­er­at­ing ex­penses.

Char­lotte’s busi­ness model is a bit like Wal­mart: Push a lot of pas­sen­gers through the air­port as cheaply as pos­si­ble, count­ing on volume to make up for low prices.

The av­er­age cost-peren­plane­ment (a stan­dard in­dus­try met­ric that ba­si­cally means cost-per­pas­sen­ger) is $1.23. That’s up from 78 cents a decade ago, driven in part by con­struc­tion and ex­pan­sion costs, but it’s ac­tu­ally down from $1.35 in 2016.

Char­lotte’s cost is well be­low other ma­jor hubs, and a ma­jor rea­son US Air­ways and its suc­ces­sor, Amer­i­can Air­lines, have made it a pri­mary hub: At­lanta’s cost-per-en­plane­ment av­er­ages $2.50, Dal­las/Fort Worth’s is $11.28, and Mi­ami’s is al­most $20.

“His­tor­i­cally, Char­lotte’s been the most ef­fi­cient large hub in terms of cost per pas­sen­ger,” said avi­a­tion in­dus­try an­a­lyst Bob Mann.

But de­spite its low cost for air­lines, Char­lotte’s sta­tus as a so-called “fortress hub,” com­fort­ably ruled by Amer­i­can Air­lines, of­ten means high air­fares for lo­cal trav­el­ers. The av­er­age do­mes­tic, round-trip air­fare from Char­lotte av­er­aged $412 last year, al­most 20 per­cent above the na­tional av­er­age.

The new gates could al­low com­pet­ing air­lines like South­west and Fron­tier to add flights at Char­lotte Dou­glas, said Seth Ka­plan, an in­dus­try an­a­lyst and man­ag­ing di­rec­tor of Avi­a­tion Weekly.

“The new ca­pac­ity will open up some op­por­tu­ni­ties for not just Amer­i­can but its com­peti­tors, too,” said Ka­plan. “That could put some mod­est pressure on Amer­i­can’s com­pet­i­tive po­si­tion in Char­lotte.”

But Ka­plan and Mann said they don’t see any ma­jor risk that Amer­i­can Air­lines will lower the num­ber of flights at Char- lotte Dou­glas or take the more ex­treme step of re­mov­ing the air­port’s hub sta­tus.

“When any en­tity is very de­pen­dent on one other en­tity, there’s a cer­tain level of risk that goes along with that,” said Ka­plan. “But Char­lotte isn’t an ex­tra hub in a highly frag­mented U.S. air­line in­dus­try in the same way Pitts­burgh, Cincin­nati, Mem­phis and Cleve­land were. ... Char­lotte is by all ac­counts and ap­pear­ances a prof­itable hub.”

Ka­plan also said that the wave of con­sol­i­da­tion that swept the air­line in­dus­try start­ing in the early 2000s and cul­mi­nat­ing in Amer­i­can’s 2013 merger with US Air­ways won’t be re­peated in the fore­see­able fu­ture.

“Amer­i­can can’t merge with Delta and make Char­lotte merge with At­lanta,” the South­east’s other mega-hub, he said.

De­spite Char­lotte’s sta­tus as the sev­en­th­bus­i­est air­port in the world (mea­sured by take­offs and land­ings), a ma­jor­ity of the air­port’s rev­enue ac­tu­ally comes from much more earth­bound sources. The sin­gle big­gest source of dol­lars for Char­lotte Dou­glas is park­ing, which ac­counted for $59.3 mil­lion, or more than 27 per­cent of the air­port’s rev­enue.

THE NEW CA­PAC­ITY WILL OPEN UP SOME OP­POR­TU­NI­TIES FOR NOT JUST AMER­I­CAN BUT ITS COM­PETI­TORS, TOO. THAT COULD PUT SOME MOD­EST PRESSURE ON AMER­I­CAN’S COM­PET­I­TIVE PO­SI­TION IN CHAR­LOTTE.

Seth Ka­plan, an in­dus­try an­a­lyst and man­ag­ing di­rec­tor of Avi­a­tion Weekly

Food, bev­er­age and re­tail sales in the ter­mi­nal ac­counted for an­other $42.5 mil­lion, or al­most 20 per­cent, of the air­port’s rev­enue. Amer­i­can Air­lines ac­counted for $55.1 mil­lion, or just over a quar­ter of rev­enue at Char­lotte Dou­glas. Delta Air Lines, by con­trast, made up just $3.1 mil­lion, or 1 per­cent, of the air­port’s rev­enue.

JEFF SINER [email protected]­lot­teob­server.com

The Con­course A ex­pan­sion at Char­lotte Dou­glas In­ter­na­tional Air­port will open this week. United, South­west, Jet­Blue, Fron­tier and Air Canada air­lines will all be served by the nearly 230,000-square-foot ad­di­tion. The ex­pan­sion, air­port of­fi­cials said, will start re­liev­ing con­ges­tion im­me­di­ately.

ELY PORTILLO ely­por­[email protected]­lot­teob­server.com

Ev­ery seat at Con­course A North has out­lets to charge de­vices.

JEFF SINER [email protected]­lot­teob­server.com

In­side the Con­course A ex­pan­sion at Char­lotte Dou­glas In­ter­na­tional Air­port is dig­i­tal art­work ti­tled “In­ter­con­nected” by Cal­i­for­nia artist Re­fik Anadol. The LED dis­play on puls­ing screens cov­ers three walls.

JEFF SINER [email protected]­lot­teob­server.com

Most pas­sen­gers at Char­lotte Dou­glas are trans­fer­ring from one plane to an­other, not start­ing or end­ing their trip at the air­port. That means Char­lotte is par­tic­u­larly vul­ner­a­ble to any shifts in routes from Amer­i­can Air­lines that re­duce the num­ber of con­nec­tions.

COUR­TESY PERKINS+WILL |C DE­SIGN.

A view of the Con­course A North ex­pan­sion. Trav­el­ers fly­ing on car­ri­ers other than Amer­i­can Air­lines will use the new gates.

CHAR­LOTTE DOU­GLAS IN­TER­NA­TIONAL AIR­PORT

A ren­der­ing of the new ter­mi­nal road, with eight lanes in­stead of the ex­ist­ing three.

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