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Sunday, 03 June 2012 11:26

GR airport numbers climb, parking plans pay off

Written by  Matthew Gryczan
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GR airport numbers climb, parking plans pay off Courtesy photo
GRAND RAPIDS — Much to the chagrin of his wife and son, Phillip Johnson likes to spend time in airports when he is on a family vacation — an airport often tells the unvarnished truth about a community, he reasons. 

"If they have a vibrant airport, they a have a vibrant community," said Johnson, deputy executive director of the Kent County Department of Aeronautics in Grand Rapids. "If the airport is dying, the community is probably dying. There's exceptions, but that is pretty much the case."

That critique applies to his own baby — Gerald R. Ford International Airport in Grand Rapids. Judging from just-released unaudited figures and projects in the works, Johnson's rule of thumb appears to hold.

A record 2.2 million passengers bustled through the gates last year at Ford Airport, the state's second-largest airport. But a different sort of traffic was Ford Airport's No. 1 moneymaker: parking.

The airport's four-story parking lot brought in about $13 million in revenue last year, more than enough to service the bonds issued to pay for the $130 million structure and for improvements that some criticized as being too expensive when the amenity opened two years ago.

After the debt was serviced and operational expenses paid, the marquee parking structure — with a sweeping canopy reminiscent of flowing water — added about $3 million to Ford Airport's reserves last year, bringing total reserves to $23.7 million, unaudited figures show.

While the airport technically posted a loss from operations of about $1.1 million on revenue of about $31.6 million in 2011, Ford officials said they are pleased. The loss is due to $15.8 million in depreciation expenses that are a result of the new parking structure and more than $50 million in renovations of the terminal in 2000.

Armed with healthy financials and support from a regional alliance of companies, Ford Airport now is more focused on operations and marketing than bricks and mortar. The airline industry is being buffeted nationally by consolidations and bankruptcies, and the airport, too, is strapped in for a bumpy ride.

In July, Atlanta-based Delta Air Lines Inc. will end nonstop service linking Ford Airport with Ronald Reagan Washington National Airport in Washington, D.C. — part of a swap arrangement where Delta gave its "slots" or round-trip flights to Tempe, Ariz.-based US Airways Inc. in exchange for that airline's slots at LaGuardia Airport in New York City.

After the swap, Grand Rapids will be the largest city east of the Mississippi that will not have a daily nonstop link to Reagan National, Johnson said.

Still, the Grand Rapids market doesn't have the same demand to reach Reagan National and the nearby Pentagon that other cities with ties to the U.S. Department of Defense may have. In addition, Orlando, Fla.-based AirTran Airways will continue nonstop daily service from Ford Airport to Baltimore-Washington International Thurgood Marshall Airport.

"Our biggest focus now is AirTran and Southwest," Johnson said.

Dallas-based Southwest Airlines Inc. bought AirTran about a year ago and is determining what nonstop routes it will maintain. Fifteen cities were notified this year that they would lose AirTran service that would not be replaced by Southwest service.

"We were notified that we were on the 'keep' list, but we're not sure what routes will be running out of Grand Rapids other than the existing ones we have now," Johnson said.

Johnson has been interim executive director since the December retirement of Jim Kolosky. On May 9, Bryan Ryks, executive director of the Duluth Airport Authority in Minnesota, was named the new executive director.

The airport is used to upheaval in the way carriers service West Michigan. The airport has worked through the combination of Delta and Northwest airlines and United and Continental airlines, and it is dealing with the aftermath of the recent Chapter 11 reorganization filed by Fort Worth, Texas-based American Airlines.

The Federal Aviation Administration considers Ford Airport a small hub airport, but it is large enough to attract airlines that want a piece of the West Michigan pie.

Still, attracting a new airline or persuading an existing carrier to expand service often takes more muscle than what an airport itself can provide. Airlines come into a market only after they are convinced that they can make money there, Johnson said, and the best persuasion comes from local companies that show they are able to support new or expanded routes.

In West Michigan, that support came in the form of the Regional Air Alliance of West Michigan, a 501(c)(3) organization founded by Dick DeVos and made up of more than 30 corporate members. The alliance was able to act as a unified voice for the potential market. DeVos, a one-time candidate for Michigan governor, is president and founder of Windquest Group and son of Amway Corp. co-founder Richard DeVos.

DeVos and the alliance played a key role in bringing AirTran to Ford Airport three years ago. Airport representatives had pursued the airline for 10 years, but AirTran officials always asked for assurances that a market for business travelers would materialize, Johnson said.

At the time, average domestic fares at Ford were high — the second-highest among the top 100 airports in the country for the second quarter of 2009.

Then members of the DeVos family connected with top AirTran executives to promote West Michigan's case. In January 2010, Air­Tran announced it would start service to Baltimore and Orlando, home of the National Basketball Association's Orlando Magic — owned by the DeVos family.

"If you need a spokesperson, who better than Dick DeVos?" Johnson said.

After AirTran entered the market, low-cost carriers Allegiant Air, based in Las Vegas, and Frontier soon followed.

At a gathering in Grand Rapids in February, DeVos encouraged local business leaders to become more vocal about their air travel needs, because West Michigan has a higher-than-average number of business travelers compared with the national average, and competition lowers the average fares at Ford Airport.

A ranking of the top 100 U.S. airports, released April 30 by the U.S. Department of Transportation's Bureau of Transportation Statistics, found that Ford Airport had improved to 17th most expensive in terms of average domestic fares for the fourth quarter last year, with an average of $418.

Owned by Kent County and managed by an independent board, Ford Airport operates under a compensatory agreement — meaning it keeps revenue from parking, fees from car rental companies, concessions, leases of terminal building space and the apron around the terminal, and other operations. Airlines pay only for facilities they use.

Airports such as Detroit Metropolitan Airport in Romulus operate under a residual agreement, where the airport shares revenue from parking and other sources with airlines that have invested heavily in those operations.

Johnson and Brian Picardat, finance and administration director for the Kent County Department of Aeronautics, said that because Ford Airport was in sound financial shape, they pushed for a 4,500-space parking structure that was close to the terminal building, to replace an uncovered lot for 1,000 cars that was constantly full.

The project turned out to be more than building just a four-story structure — amenities such as the covered canopy and two covered walkways, modifications to the terminal building and the addition of escalator and elevator cores doubled the price. The outside was clad in a red terra-cotta facade "because we didn't want just another gray parking structure across the street," Johnson said.

With 1,500 cars a day as the break-even point, the ramp averaged 1,900 cars daily the first year, rising to 2,000 last year.

"And what a welcoming image when someone is coming to West Michigan for the first time," said Johnson, the aficionado of airports. "It's a way for our community to say, 'This is who we are.' "

This story ran in abridged form in the May edition of Crain's Michigan Business. More state and Southeast Michigan business news can be found at www.crainsdetroit.com/crainsmichiganbusiness.

 

Read 1831 times Last modified on Thursday, 02 August 2012 16:18

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