MSP airport financially insulated from merger

Security check
Passengers wait to clear security into the gate area of the Minneapolis/St. Paul International Airport.
MPR Photo/Charlie Knutson

Most experts agree that it's unlikely the Minneapolis-St. Paul International Airport would lose its hub status in the event of a merger between Northwest and another carrier.

And even if it were to happen, the Metropolitan Airports Commission, which runs the airport, stands to get a chunk of money back from Northwest. If the airline gives up either its hub or its headquarters, it gives up rebates valued at more than $215 million by 2020.

Rebates aside, MAC spokesman Pat Hogan said the rents and fees airlines pay the airport are less important than you might expect.

"Airlines only provide about a third of the airport commission's income. The rest comes from food and retail concessions, advertising, and other revenue streams we have," Hogan said.

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The biggest revenue stream of all comes from parking.

"Airlines only provide about a third of the airport commission's income. The rest comes from food and retail concessions, advertising, and other revenue streams we have."

Since 2004, concessions and parking revenues have shot up 31 percent, compared to a 10 percent increase in revenues from airlines.

Pat Hogan said concessions could drop if Northwest cut service, but the MAC would expect other airlines to come in and fill in some gaps in service, which would help preserve concession revenues.

Hogan added that parking would likely continue to be a moneymaker.

"One of the things about parking is that the main people who use that are people who are from the Twin Cities area. So those people are going to continue to fly, with or without a hub at MSP. So we would hope that our finances would continue to be strong even without a hub," Hogan said.

Transportation expert Joe Schwieterman of DePaul University in Chicago said the airport reflects what has become, to some extent, a new world order.

"Since 9/11 we have a huge change in how airports are perceived and how they're used. If people arrive at the airport an hour and half ahead, it's a lot of disposable income chasing goods and services, and it's been a great thing for airport authorities," Schwieterman said. "The landing fee revenues at a lot of airports are down, there's rising costs. But this retail sector, this service sector, is blossoming, and it's given airports a new shot in the arm."

But other airports that have been dehubbed have felt financial pain.

Pittsburgh International Airport lost its US Airways primary hub status in 2004 -- not long before US Airways merged with America West.

"Concessions have gone down. Concessions are a big issue," said Jeff Martinelli, spokesman for the Allegheny County Airport Authority, which runs the Pittsburgh airport.

Flight and passenger numbers have plummeted at Pittsburgh since it lost its hub. In 2001, the airport saw 20 million passengers a year. Now it sees 10 million, and the airport has closed some concessions.

Martinelli said while some new low-cost carriers have come into the market and increased service, the airport has had to be careful about its finances. It restructured debt and has been doing some cost-cutting.

"Anything from turning elevators and escalators off at night," Martinelli said. "I don't want to say we're on a hiring freeze, but we've been very careful about employees and things along those lines."

Many experts said Minneapolis is in a much stronger position than Pittsburgh was in terms of retaining airline service.

MAC spokesman Pat Hogan said other airlines would have to absorb the costs of operating the airport if Northwest scaled back.

"The airfield is a cost that we distribute among the airlines, so it all depends on the number of flights. If they have fewer flights, then they'll have to pay more per flight. So there could be an impact on other airlines, if Northwest were to significantly draw down its service," explained Hogan.

Hogan said in the end, it's impossible to predict a level of service reduction that would sink MSP, but the MAC feels confident that it's sufficiently protected.