Airports Make Up For Lost Revenue W/ New Parking Fees

Parking fees are skyrocketing at some airports as airport authorities tap into new sources of income to make up for the revenue shortfall caused by fallout from the Sept. 11 terrorist attacks. Trying to defray the double whammy of decreased revenues due to the dropoff in traffic and huge increases in security costs, airport officials, in some cases, have succeeded in implementing fee increases as high as 40 percent.

At Los Angeles International, daily rates rose last February from $24 to $30 in the Central Terminal Area parking facility, from $5 to $8 at Economy Lot B and from $7 to $10 at Economy Lot C. To help make up the $100 million shortfall in its 2001-2002 budget, caused, in part, by a 35 percent drop in concession fees and a doubling of security costs to $78 million, the LAX airport authority also raised landing fees.

The airport authority at John Wayne International Airport, in nearby Orange County, on April 1 implemented parking fee increases to $12 a day, up from $7, at the long-term remote lot, and $17, up from $11, at the terminal lot. Fees on ground transportation providers, such as limos and shuttle buses, increased to $2.25 per trip, from $1.75. The airport's security costs, which included the hiring of 106 additional police officers, ballooned to $12.7 million a year, from $4 million prior to Sept. 11, although John Wayne is exceptional in that traffic in April actually increased year over year by 5.6 percent. "We have a strong, diverse economy here in Orange County and we are not an international airport," said spokesperson Justin McCusker.

Jacksonville International has implemented a $14 daily rate, a $2 increase, at its hourly garage, $12 at its daily garage, also a $2 increase, and $7 at its uncovered lot, up $1. The ground transportation fee, charged to taxis, limos and shuttles, rose to $2.50 a trip for permitted vehicles, from $1—those without a permit pay a $7 cash fee—and a new $2 car rental surcharge also went into effect. At Sacramento International, the daily rate at the hourly garage rose to $24, from $17, and at the daily lot from $7 to $10 on May 1.

The trend, along with the hassles associated with parking at the airport, is benefiting some private off-airport parking firms. Those with corporate programs are finding more companies receptive to their pitch. "More corporations are attuned to what they spend on everything, from airlines to dining and now, finally, parking," said Jeff Okyle, senior vice president of business development at APCOA/Standard Parking, who oversees two garages near LAX. "There's growing interest in negotiated programs."

Describing the financial impact of Sept. 11 on airports as "an economic tsunami," Eryn Travis, spokesperson at the American Association of Airport Executives, a trade group based in Washington, D.C., said passenger volumes overall have been slowly creeping back up and were down about 10 percent in mid-June. "Passenger revenues fell off a cliff, while costs skyrocketed," she said. Airports had to budget for the cost of new security mandates, which, in some cases, required the hiring of additional police officers on an overtime basis. So far, $175 million from the U.S. Department of Defense appropriations bill has been distributed among airports to provide some reimbursement of security costs, and Congress currently is debating additional aid, ranging between $100 million and $200 million. However, Travis said these amounts account for a fraction of the total cost.

Some airports, including John Wayne and Burbank/Glendale/Pasadena, were able to make up for the loss of revenues by dipping into ample reserve funds, the legacy of several fat years. But airports are by no means out of the hole. This year, the fiscal picture could worsen due to another looming challenge—installation of the enormous baggage screening machines required under new Transportation Security Administration rules. According to Travis, the Inspector General estimated that the total cost of construction for installation of the explosive detection systems would be $2 billion. That amount also includes extra construction and labor costs for the smaller explosive trace detection devices, which the airports are expected to use in the interim.

To grasp the magnitude of the task, "imagine installing 35 washer/dryers in your house," said Bob Parker, a spokesperson at Seattle-Tacoma International Airport. At Sea-Tac, building accommodations for the machines in Concourse A will cost about $50 million, and another $100 million for installation in the main terminal, Parker said.

While Parker said Sea-Tac, which has deferred some projects, including installation of fiber-optic cable for e-ticket kiosks, has not increased its parking fees, higher airline landing fees will make up its $11 million shortfall. Similar to many airports, Sea-Tac has what is called a residual agreement with the airlines: After adding up the cost of running the airport and subtracting income from concessions, parking and other sources, the airlines write a check for whatever is left over. "Ultimately, it's the traveler who will pay," Parker said.

With parking typically the second-largest source of airport revenues, after airline landing fees and rental of the terminal building, it's an appealing target for fee increases at many airports, according to Larry Donoghue, president of Larry Donoghue Associates, a parking consultant firm in Chicago. This is especially so considering that parking itself has taken a severe hit. The reduction in parking revenues caused by the falloff in travelers has been magnified by the ban on non-airline passengers beyond the security checkpoint, Donoghue said.

Another difficulty has been the Federal Aviation Administration-mandated ban on parking within 300 feet of the terminal. Busy airports with multi-story parking garages adjacent to the terminal, such as Chicago O'Hare, experienced the greatest impact, since they lost many more spaces they otherwise could have filled. Many airports have petitioned FAA successfully to rescind the ban on all or part of their off-limits parking, provided they agree to inspect all vehicles in the contested area. Some airports have gotten around that requirement, which obviously results in more traveler delays and congestion, by instituting height restrictions on vehicles. Sea-Tac and John Wayne, for example, each have instituted a height restriction of six feet six inches on vehicles using close-in parking. The logic: Only a large SUV or van packed with explosives would have the capacity to take out the terminal.

Some airports also are introducing new airport access fees, or increasing or extending existing fees, to include vehicles operated not only by taxi, bus and chauffeured transportation firms, but also hotels and off-airport parking providers. After years of resistance by hotel and motel companies, Miami International finally is implementing a $2.50 charge per trip on hotel shuttle buses on Aug. 1. It began charging off-airport parking lot companies the fee last October, although one firm legally has contested the charge.

Charging access fees to off-airport parking firms can be a touchy issue, depending on the airport. At some facilities, the private parking companies are viewed as allies that help absorb the overflow when the airport-owned lots are full. Increasingly, however, as airport authorities construct new garages to create more capacity, and the private companies enlarge their lots and more aggressively compete for business, the off-airport firms are being viewed by airport officials as competition. One way to discourage the competition, or at least profit from it, is to charge access fees.

The evolution of parking at Burbank/Glendale/Pasadena airport is a textbook case. Initially, the two off-airport parking facilities, one of which was owned by the Airport Hilton, had so few spaces available to airport passengers that they did not pose a threat, according to airport spokesperson Victor Gill. However, that began to change in the 1990s, when each provider began to expand the number of spaces dramatically, acquire new lots and post signage advertising their services. Today, the airport owns 4,500 spaces and the off-airport providers have 2,000 spaces, Gill said. With the airport historically generating 40 percent to 45 percent of its annual operating revenue from parking, it cannot afford to have too much of the profits siphoned off by the private operators. Last month, it implemented its first fee on off-airport parking providers, a $1.50 charge per shuttle bus entering the airport, plus 9 percent of the gross revenues related to airport parking. The 50 cent fee on hotel shuttles and limos, charter buses and shuttle buses was increased to $1.50 and taxi operators had their yearly access fee doubled to $500.

The total annual amount Burbank will receive from its off-airport fees, including 9 percent of gross revenues from car rental companies, is $530,000 annually, of which approximately half—$230,000—will derive from off-airport parking firms, according to Gill.