Airport Finds $7.68 Solution

Officials await mid-year stats to know if creative-financing plan is paying off

Luring the five airlines from Fayetteville’s Drake Field to the Northwest Arkansas Regional Airport was easy.

Officials at the new airport in Highfill offered the airlines a special deal: Pay the same rent you were paying at Drake for the first year at the new facility. After that, the rent won’t go up unless the number of passengers increases.

Airport officials are banking on an increase of passengers.

That first year is over. The new airport opened in November 1998 with a dedication ceremony attended by President Bill Clinton.

In January, a surcharge of $7.68 kicked in that the airlines must pay the new airport for each additional passenger above their average enplanements at Drake Field. (In airport jargon, “enplanement” means one passenger boarding one airplane for a flight.)

Scott Van Laningham, airport staff director, thinks the surcharge will bring in an extra $200,000 this year. That’s on top of the $700,000 the airlines pay in rent and other fees to the airport.

“Basically,” Van Laningham said, “we told the airlines, ‘We’ll protect you on the downside by charging you what it cost to operate from Drake Field. But we think you’re going to grow the market, and we want to share in that growth.”

The new financing scheme was the brainchild of Uvalde Lindsey, former director of the Northwest Arkansas Regional Airport Authority. Van Laningham said he doesn’t know of any other airport that has used a similar formula to bring airlines on board.

Although preliminary numbers look good, airport officials won’t know until mid-year if the surcharge is paying off.

If the surcharge doesn’t help, Van Laningham said, “We’ll have to hold down expenses.”

1999 was good year

1999 was a better year than expected because four of the five airlines moved to the new airport during the first quarter of the year. Airport officials had expected one airline to defect from Drake during each of the year’s four quarters. The last holdout — Atlantic Southeast Airlines, a Delta carrier — moved to the new airport in September.

As a result, Northwest Arkansas Regional Airport had 329,216 enplanments in 1999. Airport officials had projected 207,101 enplanements for the year.

Enplanements for both airports combined totaled 350,114 in 1999. That’s an increase of 22 percent over 286,898 for both airports in 1998.

Van Laningham said the numbers indicate more passengers are flying out of the regional airport instead of traveling to nearby cities like Tulsa and Little Rock to catch flights.

Van Laningham is predicting a more modest increase in enplanements of 5 percent for 2000 over the 1999 numbers.

He said enplanement costs per passenger doesn’t apply to the new airport since it’s using a unique formula to finance operation. Enplanement costs at Drake Field were about $3.40 per passenger, considerably lower than the national average of $5 to $7 per passenger. (Enplanement cost is the cost to the facility of putting a single passenger on an airplane.)

During construction, critics of the new airport said enplanement costs would make it too expensive for passengers to fly out of Northwest Arkansas Regional Airport.

Michael J. Boyd, president of The Boyd Group/Aviation Systems Research Corp. of Golden, Colo., predicted in 1995 that high enplanement costs could effectively turn the new airport into a small version of the Denver International Airport, where ticket prices skyrocketed after construction of the airport, prompting many city residents to drive to Colorado Springs to catch cheap flights instead.

But that hasn’t been the case. Van Laningham said airport costs amount to only about 3 to 5 percent of costs to the airlines, so that amount of increase in ticket prices would be negligible.

Jet service

The primary draw of the new airport is jet service, Van Laningham said.

A longer runway — 8,800 feet — allows jets to operate at Northwest Regional. Drake Field could only accommodate slower turboprop aircraft.

Jet service means shorter flights and direct flights to cities like Chicago and Atlanta. Jets can also fly above bad weather and thus encounter less turbulence.

The five airlines operating at the new airport (and major destinations) include: American Eagle (Dallas, Chicago), Northwest Airlines (Memphis), Atlantic Southeast Airlines (Dallas, Atlanta), TransWorld Express (St. Louis) and U.S. Air (Little Rock, Kansas City).

American Eagle and Northwest Airlines operate only jets from the new airport. U.S. Air is the only airline there that uses only turboprop aircraft.

The five airlines currently operate 48 round-trip flights daily from the new airport, 27 of those on regional jets.

The airlines pay $24.11 per SF per year in rent for “preferential space” and $11.36 per SF for common-use space. The landing fee at the new airport is 45 cents per thousand pounds.

The airport issued $15 million in bond anticipation notes to get construction underway. Llama Co. of Fayetteville, Alice Walton’s investment banking firm, bought $5 million of those notes. That debt was repaid in 1997 after a $79 million bond issue.

The 7,600-SF terminal building at the airport has since been named in honor of Walton, who is the daughter of the late Sam Walton, founder of Wal-Mart Stores Inc.

Van Laningham said airport officials didn’t know how much it would cost to operate the facility, including such routine things like heating and cooling the terminal building.

Van Laningham said terminal space for the five airlines and five rental car companies is currently occupied. Another airline could bring service to the airport, but it would have to share counter space with a current tenant. But, if a large airline needs the space, Van Laningham said building onto the new terminal building isn’t out of the question.

The airport has already had to expand the parking lot, adding another 400 spaces.

The main money maker for the airport is the parking lot, which is expected to bring in $1.3 million in revenue this year.

“Traditionally, parking lots are one of the best revenue generators for airports,” Van Laningham said. “That’s not at all unusual.”

Fort Smith

David Krutch, assistant manager of the airport in Fort Smith, said enplanements were down at that facility in 1999, but he doesn’t think the opening of Northwest Regional is the reason.

“Ultimately, the drive time to the new airport is greater than that to Tulsa,” he said, noting that Fort Smith residents are more likely to take the Muskogee Turnpike to Tulsa than try to navigate the mountains in Northwest Arkansas.

In 1998, TransWorld Express pulled out of Fort Smith after beginning service there only a year earlier.

Krutch thinks the drop in enplanments — from 109,034 in 1998 to 108,072 in 1999 — was due to TWE leaving the airport and no more direct flights from Fort Smith to St. Louis.

Krutch said the Fort Smith airport appears to have picked up some passengers that live between Fort Smith and Fayetteville because the drive to Highfill is too far for them to go now to catch a flight.

But Krutch said Northwest Regional is probably “recapturing” passengers who had been driving to Tulsa instead.

Currently, the Fort Smith airport is served by American Eagle, Northwest Airlink (Northwest Airlines) and ASA.