Airport (in Minneapolis)looks for big cuts, may shut charter terminal

The Startribune ^ | November 8, 2002 | Dan Wascoe, Jr.

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Sharp pressure to cut costs is forcing airport officials to consider closing the new Humphrey terminal at Minneapolis-St. Paul International Airport for six months a year, selling six smaller airports and even turning down the thermostat by 10 degrees in the big Lindbergh terminal this winter -- then raising it substantially next summer.

Jeff Hamiel, executive director of the Metropolitan Airports Commission (MAC), said Thursday that the 15-member body might have to pull its seat belts tighter as it debates next year's budget. To keep spending the same as this year -- a step urged by Northwest and other airlines -- he said the commission also might have to raise parking fees for airport employees, close its for-hire conference center, lay off employees and reopen contracts covering cleaning and maintenance costs at the airport.

Airport users likely will complain, he said, but the commission might have to "adjust downward the threshold that we used to consider acceptable."

Hamiel said he doesn't know yet how much money such steps might save and that selling the smaller airports, known as reliever airports, probably is unlikely. But he said that's the type of cost reduction that might be needed to meet Northwest's goal.

The commission's tendency to accommodate Northwest's requests stems from the airline's huge presence at the airport. Northwest, based in Eagan, accounts for about 80 percent of the airport's revenue from airlines.

Hamiel acknowledged that the airline industry "is in terrible condition" and that its costs are more volatile than airport expenses. He also said that airlines and airports are close partners whose needs "cannot be separated." But he has resisted some budget cuts, especially employee layoffs, and he said Thursday that he wants his bosses, the commission, to provide "policy direction and priorities" in the face of continued airline pressure for cuts.

A key problem for the commission is how to restrain spending in the face of additional operating and maintenance expenses generated by newly opened buildings and aircraft pavement area.

Hamiel also said that takeoffs and landings at the airport are within 1 percent of the number before the Sept. 11 terrorist attacks. That rebound in airport activity limits the commission's ability to trim some parts of its budget, he said -- especially airfield maintenance. While some flights have been cut, many airlines have responded to reduced passenger demand by switching to smaller aircraft.

Also, Northwest continues to ask the commission to expand the number of gates at the Lindbergh terminal to accommodate future flights. The MAC and the airline are negotiating who would pay for that expansion.

Every new building and addition also boosts the MAC's depreciation costs, which account for 47 percent of next year's draft budget. Proposed expenses already have been cut from $178.1 million to $172.2 million -- still a 6.2 percent increase from this year's latest estimate of $162.2 million.

Commission members Robert Mars of Duluth, Mike Landy of St. Cloud and Coral Houle of Bloomington said during a MAC Finance Committee meeting Thursday that Hamiel's suggestions are necessary at a time when Northwest and other airlines are struggling.

Mars, who has argued most forcefully for cuts the past two years, said they are "not a unique management problem" for businesses and government agencies in tough times.

As a school board member in Duluth, he said, he has participated in deliberations to close three schools and he noted that more closings lie ahead.

"These issues are everywhere," he said.

The MAC's deliberations occur against a changing political backdrop after this week's elections: a stronger Republican influence in next year's Legislature, a Republican governor-elect and the prospect of six new MAC appointees, including a new chairman.

Most of the MAC staff's attention in coming weeks will center on airport spending. The staff already has proposed cuts totaling nearly $6 million, mainly by changing its assumptions of future costs based on past averages.

Officials said that could be a risky approach if, for example, this winter is unusually cold and snowy, driving up operating costs.

But Hamiel and John DeCoster, Northwest's regional director of airport affairs, agreed that both the airlines and the MAC already have "picked the low-hanging fruit" in their budgets -- the easiest expenses to trim. The airline continues to lose money, lay off employees and close offices and maintenance facilities.

"If we fail, you fail," DeCoster said. "It's that simple."

He urged the MAC to consider dropping $30,000, $50,000 and $100,000 items in its budget to save a total of $9.8 million.

"Look at every line item, no matter how small," he said.

Among Hamiel's proposals, closing the 18-month-old Humphrey terminal during months when charter activity is low -- May to October -- is a strong possibility.

Selling the reliever airports is another matter. They are located in Blaine, Crystal, Eden Prairie, Lakeville, Lake Elmo and St. Paul, and each has vocal constituencies that include city officials, business owners and private pilots.

DeCoster said Northwest has "particular concerns" about the St. Paul Downtown Airport and Flying Cloud Airport in Eden Prairie because "they're taking people [in small private planes] who would fly commercial" in other circumstances. He said the MAC's subsidy of those airports makes it easier for them to compete with Northwest and other carriers and "that is troubling," he said.

Tom Snell, executive director of Metro North Chamber of Commerce, said his members support providing a healthy business climate for Northwest but also favor the easy access and reasonable charges that reliever airports provide.

"We don't want them priced out of the market," he said.

Pat MulQueeny, president of the Eden Prairie Chamber of Commerce, said that if the MAC does sell Flying Cloud he hopes it would not be bought by a company that wants to use the land for something else.

He also said that if private ownership meant higher charges for Flying Cloud users, his members "probably wouldn't like it."

In spite of the pressure to cut costs, Hamiel said he would not recommend measures that erode the airport's safety. DeCoster agreed.

-- Dan Wascoe Jr. is at dwascoe@startribune.com.