Airport scaling back $3B terminal

Orlando director: Revenue loss creates ‘struggle for survival’

Orlando’s airport authority on Wednesday launched its most farreaching responses to COVID-19 by scaling back a $3 billion new terminal and cutting deals with airlines, rental-car companies and concessionaire to defer or waive three months of rents.

Speaking to authority members, airport director Phil Brown stressed that no airport revenues are from taxes and that operations and construction are paid for with income from fees and rentals from airport tenants that are earning little or no revenue.

“Passenger traffic drives virtually everything we do,” Brown said. “Everybody is in a struggle for survival.”

Brown provided an outlook of passenger counts, which collapsed from an annual rate of 51 million in February. He said an estimated 26 million passengers will pass through the airport this fiscal year, 25 million next year, 40 million in 2023, 45 million in 2024 and 49 million in 2025.

“Hopefully, we are very wrong,” Brown said of the unlikely chance that the passenger-volume forecast is vastly underestimating Central Florida’s economic rebound.

The airport authority reviewed a grim outlook for an airport that had been growing rapidly and last year ranked as the nation’s 10th-busiest.

A deep dive into complex financial details lasted three hours during a virtual meeting interrupted often by unmuted remarks and noises.

“Oh my God, this is one long-ass board meeting,” an unidentified woman said abruptly and loudly, apparently unaware she was heard by the authority, staff and public audience.

Authority member Orlando Mayor Buddy Dyer responded: “Actually, I agree it’s a long meeting.”

As forecast by authority staff, the plunge and slow recovery of passenger counts will make it difficult for the airport to cover its operating costs and, in particular, its more than $200 million in annual payments on loans for construction and expansion projects.

The authority cut the airport’s operating budget by $18 million

this year and plans a $45 million cut next year. Airport savings vary from idling escalators and automatic doors to reduce power and upkeep costs to canceling upgrades and maintenance.

Until the coronavirus outbreak, the airport authority had been committed to spending $4 billion overall on construction and expansions.

Of that amount, $3 billion was dedicated to building a new terminal about a mile south of the existing terminal.

The authority agreed to pursue $371 million in combined reductions in the $4 billion construction and expansion program.

Of the $3 billion for the new terminal, which is to be ready for passengers in early 2022 and is now more than 60 percent complete, the authority wants to cut $226 million, pending negotiations with builders and other contractors.

Much of that reduction would stem from reducing a planned 19 gates to 15 gates. Eliminating four gates would amount to not having to build a wing of the new terminal and a host of related facilities.

Brown said the forecast for passenger volumes suggests that those four gates would not be needed until late in this decade and that it then might take two to three years to build the gates at a significantly higher cost than currently budgeted.

The airport authority’s chairman, Domingo Sanchez, noted that a delay would escalate costs.

“I’m not convinced we should pause on any of it,” Sanchez said.

But Dyer said he preferred a conservative approach of scaling back costs because the airport is so dependent on tourism compared with many other major airports.

“We are going to be one of the last ones to come back,” Dyer said.

Also approved by the authority is proposed relief from rents for airlines, carrental companies and concessionaires for May, June and July.

Airlines will be offered a deferral of rents, car-rental companies will be offered a 90-day waiver and concessionaires will have be offered either a deferral or waiver for the period.

Anne Morrison, a vice president with Avis Budget Group, praised the authority’s plan a step in the right direction.

“We remain concerned as an industry on the extent of the relief and also on the cash burn particularly in the third and forth quarters,” Morrison said. “But we do expect to continue to work through that challenge with the airport.”

The waivers and deferrals will come with a host of requirements and conditions that, Brown said several times, make the options complex.

Brown also noted that the airport may not see enough of a rebound to reopen and reactive airport tenants until late this year.

Many airport restaurant workers who are now idled called into the virtual meeting, urging the authority to require any concessionaires benefiting from a rent deferral or waiver to protect workers’ jobs and health.

The authority agreed to require concessionaires to meet COVID-19 protection guidelines.