LITTLE ROCK — The six airlines serving the state’s largest airport will face additional costs totaling about $2 million next year if the airport’s proposed 2013 operating budget is adopted later this month.
The figure will increase total revenue from airlines to nearly $10 million annually, or an airline cost of $8.50 per departing passenger, at Bill and Hillary Clinton National Airport/Adams Field. It’s an increase of $1.84 per departing passenger, senior airport executives said Wednesday during a budget workshop held for the Little Rock Municipal Airport Commission. Airline revenue includes terminal rentals and landing fees.
The airport is served by American Airlines, Delta Airlines, Frontier Airlines, Southwest Airlines, United Airlines and US Airways Express.
Under the proposal, which is the first rate increase for the airlines in four years, the airlines’ costs to lease space in the passenger terminal will increase from $24.74 per square foot to $30.34 per square foot. The new rates, the executives said, are closer to the industry norm and reflect the additional costs associated with a $67 million renovation and expansion of the terminal, a project that will wrap up early next year.
Much of the extra cost — $1,064,681 — is associated with the terminal’s new automated baggage-handling system. The operating and maintenance contract alone will cost $618,000 annually. And some of the cost is tied to the increased space that each airline will have, the executives said.
The airport will be taking a number of budget hits next year, including:
Nearly $1 million in lost income and increased expenses associated with the closing of Hawker Beechcraft facilities at the airport.
The aircraft manufacturer, which is in bankruptcy, announced last month that it planned to close the facilities, which will result in $587,626 less to the airport for the rental of five corporate hangars and the lease of 45.7 acres.
The airport will have to spend an estimated $300,000 annually to maintain the vacated facilities. The total also includes nearly $100,000 in lost income associated with the U.S. Postal Service’s decision to vacate 14,220 square feet of space in the airport’s air cargo facility.
More than $500,000 in increased costs associated with the raises the city of Little Rock gave its employees, including police and firefighters. Under an agreement with the city, the airport must pay the costs associated with police officers and firefighters assigned to the airport. The city granted 3 percent raises, but the airport budgeted for 3.5 percent in case the police and firefighter unions negotiate a bigger pay raise than what the city proposed, airport officials said.
The terminal rental fees would total about $4.4 million if the proposed increase for the airlines is adopted by the full commission later this month, and would account for about 14 percent of the airport’s projected operating revenue of $31.8 million next year.
Ron Mathieu, the executive director at Clinton National, doesn’t believe that the rate increases will result in higher fares for passengers. He pointed out that the airlines have increased ticket prices over the past four years, but the airport didn’t raise its rates during that time.
If airline fares rise, “it won’t be because of us,” Mathieu said after the meeting. “It will be because of what the market will bear.”
The proposed rates are lower than those at Northwest Arkansas Regional Airport at Highfill and Memphis International Airport, which are $60.47 per square foot and $73.58 per square foot, respectively, Mathieu said.
The cost per departing passenger at Clinton National, as proposed, is higher than the Northwest Arkansas and Memphis airports, which are $6.45 and $5.15, respectively. But Mathieu said Clinton National’s figure could decrease if more passengers than projected go through the airport next year. The airport, which expects to end 2012 with 1,118,667 boardings, is projecting no growth in airline passengers.
Passengers, however, will pay more to park by midyear when the airport starts charging a city sales-tax increase that it had previously absorbed rather than pass on to passengers. The move will boost airport parking revenue in 2013 by $209,087, to $10,186,385. Parking revenue is expected to total $10.4 million next year, but $825,000 of that will be paid to the city in taxes. Also, the airport will pay an expected additional $200,000 in creditcard transaction fees.
On Jan. 1, the city sales tax rose from 0.5 percent to 1.5 percent.
The parking rates include a 7.5 percent sales tax, which consists of the state sales tax of 6.5 percent and a Pulaski County sales tax of 1 percent.
This year, construction at the terminal inconvenienced passengers, and airport officials didn’t want to charge them the additional sales tax for parking. However, the construction is expected to be completed early next year.
The airport’s proposed budget also includes increases in salaries and benefits costs totaling 20 percent higher than what was budgeted in 2012. The proposed budget includes money to fill vacant or frozen positions at a cost of $920,461. Airport officials say they won’t make a decision on filling the positions until after the first quarter, when they’ll know whether revenue will rise. The budget proposal also includes, on average, 3 percent merit raises for airport employees, which will cost the airport $171,209, and an 18 percent increase in group medical benefits costs, which will be $207,675.
The airport projects net operating revenue in 2013 to be $31.8 million and operating expenses to be $23,243,915. But Mathieu said net income doesn’t include reimbursements from the federal government for land acquisition and other money that the airport might realize next year.
“They’re not in here because they are not guaranteed,” Mathieu said of that money, adding that he expected the net operating revenue to end up close to 2012 year-end estimates of $11.2 million, which would be a record for the airport.
Commissioner Kay Kelley Arnold asked Mathieu to provide an accounting of that anticipated money before the commission votes on the proposed budget.
Arkansas, Pages 9 on 12/06/2012