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Wichita residents who used to drive to Kansas City if they wanted to take advantage of Southwest's lower airfares are about to save some gas money; on June 2, the airline introduces five flights from Wichita. And that city is in the middle of building a new $101 million terminal, a decision primarily motivated by improving security concerns.
Is the new terminal what lured Southwest?
"I don't think that was a consideration," says Valerie Wise, an air service and business development manager for Wichita Airport Authority.
What do airlines care about, with respect to airports? Mainly the cost of doing business at them.
"At this point, we've had some high-level conversations with the Kansas City airport about the new terminal and we've seen a design concept," Whitney Eichinger, a Southwest spokeswoman, writes in an e-mail to The Pitch. "Keeping costs low is of utmost importance to Southwest Airlines and we want to ensure this project keeps our costs in line, so we look forward to continuing our conversations and learning more about the project."
The airline isn't signaling an appetite for expansion.
"We currently have enough gates to satisfy the operation we have [at KCI] and anticipate it staying that way with the new design," Eichinger adds.
Costs would almost certainly increase with a new terminal — for parking, for a cup of coffee and for landing an airliner on a runway.
In Indianapolis, some costs went up after its new terminal opened. Indianapolis International Airport charges a $1.88 landing fee for every 1,000 pounds of weight on an aircraft that's landing on one of its runways, compared with $1.73 for the same measure in 2006 — an increase driven partly by the lower traffic at the airport since the new terminal opened.
Costs are critical to a new terminal in Kansas City because of airlines' sensitivity to expense and because financing the project would mean the issuance of up to $1.2 billion in bonds. It's the cheapest form of financing because interest rates tied to bonds are usually low.
Kansas City's finance team estimates that a single terminal could fetch 2.8 percent in interest rates. They would be lucky to find single-digit interest rates among private-equity financiers or pension funds looking to invest in municipally owned airports.
Bonds are sold to investors to drum up quick cash. The upfront money would pay for the airport's construction. Buyers would be repaid by airport revenues — from coffee, parking spaces, landing fees.
The city would not be on the hook to make up the difference if the airport didn't produce enough revenue to cover bond payments. Bondholders would be screwed on their investments, but so would the airport's reputation when it wanted to issue bonds in the future.
Kansas City last issued KCI bonds, worth more than $250 million, for cosmetic and security upgrades in 1999. City officials say that bond issuance bought the airport 10 years of useful life, but that's about it.
VanLoh compares KCI today with driving around in a clunker. Does KCI keep doing $250 million maintenance-type work to the old-bones airport, or does it get a low-interest loan in order to eliminate all those pesky upkeep costs? "You can keep paying your own money or you can take out a loan and buy a new one," he says.
KCI is more like an old house than a 150,000-mile car. On a tour of KCI, VanLoh points to a number of cracks and patches in the walls of the aging facility, as well as some flooding in underground parts of the airport. The wear appears largely superficial and is the type of thing that critics of a new airport seize upon: Can't these things be corrected at a lesser expense?