- The Washington Times - Wednesday, May 21, 2003

ASSOCIATED PRESS

Flying into Baltimore-Washington International Airport is about to get more expensive for major airlines, to the tune of $28 million more in rents and landing fees over the next two years.

The new five-year deal, long overdue according to aviation industry officials, couldn’t come at a worse time for the industry, which is still in a slump after the September 11 attacks and reduced travel during two wars.

The increase, which will increase revenue by $15 million in 2004 and $13 million in 2005, ends a 25-year contract that limited rates and sent airport officials to cover costs with parking fees and airport restaurants.

The multimillion-dollar revenue increases and an ongoing $1.8 billion expansion show how far the once sleepy airport has come.

“The status of BWI has changed,” said Adam Pilarski, senior vice president of Avitas, an aviation-consulting firm in Washington. “This is what they should be doing. They are established now.”

However, back in 1973, transportation officials were less confident about the potential of what was then called Friendship Airport. Many saw a planned five-year expansion to challenge Washington Dulles International Airport and what is now known as Ronald Reagan Washington National Airport as a gamble.

When the expansion was done, state officials locked airlines into a 25-year deal. But the contract had unforeseen problems, airport officials said.

It covered the cost of the original expansion, but did not allow for improvements. There was also no provision for recovering operating and maintenance costs. Rents, for example, were locked as low as $16.09 per square foot.

The new agreement, which takes effect June 1, allows the airport to recover costs. Rents now run at $53 per square foot, and landing fees have gone up from $1.35 per 1,000 pounds landed to $1.63 per 1,000 pounds landed.

It also gives the airport more control over facilities and allows airport officials to seek further rent increases if costs rise by more than 15 percent over projections.

The new “basic use and lease agreement” will go before the state Board of Public Works for approval today.

Despite the fact that two major airlines, United and U.S. Airways, were in bankruptcy during much of the negotiations, airport officials said they were impressed with the airlines’ willingness to negotiate higher rates.

“Are we happy that costs are going up? No,” said Jeff Green, a spokesman for United Airlines. “But United still has the utmost confidence in airport management and that the reasoning for doing what they are doing is necessary.”

Analysts say BWI has been partially shielded from the worst downturn in the industry’s history because Southwest Airlines — the only U.S. airline to remain profitable since September 11 — is its largest tenant.

The new contract also comes at a time when Maryland, like many states, is facing a budget shortfall. But the state budget is not directly related to rates at BWI, a spokeswoman for the Maryland Aviation Administration said, because the MAA gets its money from a separate transportation trust fund.

When Southwest’s 11 new gates are added to its 15 existing gates, airport officials said revenue from that airline alone is expected to go up to $63 million in 2005, from a projected $50 million.

“Baltimore is one situation where the demand is there and we anticipate continuing to grow there, so you’ve got to put your money in,” said Christine Turneabe-Connelly, a Southwest spokeswoman.

Analysts said airfares could increase as a result of the new contract.

“Right now it will not have any effects, but long-term, we will see some impact as airlines transfer the increased cost onto customers,” said Ray Neidl, an airline analyst with Blaylock and Partners in New York.

Staff Writer Tim Lemke contributed to this report.


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